Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

ba
3 VED
2 REELED,

SIXTEENTH CONGRESS
lar Sessi
First Regular ss BC 4

Introduced by Honorable Lucy Marie Torres-Gomez

EXPLANATORY NOTE

The 13", 14" and 15" Congress adopted, but failed to pass, a proposed
legislation that would eventually have gained recognition as the "Philippine Lemon
Law.”

This law aims to protect consumers or buyers of new, but faulty, motor
vehicles, by providing them a more effective mechanism for vindicating their rights
against these defects within the so-called lemon law rights period or within a certain
mileage provided under the law. In extreme cases where the factory defects of the
car are extensive, the law also warrants the refund of the consumer's money or the
replacement of lemon car with a new automobile altogether.

The passage of this measure is long overdue.

As of the adoption of this legislation by the 14" Congress, statistics show that
of an average of 100,000 units of automobiles sold per year, 100 are reported to be
suffering from factory defects.

While Republic Act No. 7394, otherwise known as the Consumer Protection
Act, provides for the protection of consumers from scheming manufacturers and
defective products, its consumer-protection mechanism for lemon vehicles. still
leaves much to be desired

Generally, complaints before the DTI are resolved through mediation. But said
grievance procedure is not enough to protect the consumer rights of automobile
buyers who mostly do not have enough economic surpluses for repairs and
insurance participation fees, but are nonetheless constrained to allocate such
unwarranted expenses for brand new vehicles. Therefore, there is a need to install a
more effective sanction against these defects.

The most effective way is to give the DTI more punitive powers in order to
reinforce its function of protecting buyers of lemon cars through the enactment of this
proposed legislation.

This refilled version of the proposal is the same version adopted by the
members of the bicameral conference committee during the 13" and 14" Congress


As previously presented, it already incorporates and represents the various
proposals from the car manufacturing industry, consumer protection organizations,
concerned government agencies, individual consumers, and other industry
stakeholders. All of these groups had actively participated in crafting this piece of
legislation. It is thus a version acceptable to alll concerned

In fine, we hope that this legislation will be given preferential and immediate
attention as with other proposed legislations imbued with public interest

‘LUCY/MARIE@@RRES-GOMEZ


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Sixteenth Congress
First Regular Session

4
HOUSE BILL NO. 2864

INTRODUCED BY HONORABLE LUCY TORRES-GOMEZ

AN ACT
STRENGTHENING CONSUMER PROTECTION IN THE PURCHASE OF BRAND
NEW VEHICLES AND FOR OTHER PURPOSES

SECTION 1. Short Title. — This Act shall be known as the “Lemon Law of 2008.”

SECTION 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 violation thereof,

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

(a)’Brand New Vehicle’ refers to a vehicle constructed entirely from new parts
that has never been sold or registered with the Department of Transportation and
Communication or an appropriate agency or authority and operated on the highway of
the Philippines, or in foreign state or country.

(b)"Collateral Charges’ refers to the fee paid to the Land Transportation Office for
the registration of a brand new motor vehicle and other incidental expense including the
cost of insurance pertaining to aid 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)’Dealer’ or “Seller” refers to any person other than manufacturer who sells
motor vehicle to the public.

(f)’Determination of Reasonable Allowance for Use"- For purpose of this Act,
“reasonable allowance for use” shall mean twenty per cent (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) 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 (DT!)

(j)"Lemon Law Right 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 of 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 non
confirmatory 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 vehicle, or of
distributing motor vehicles to motor vehicle dealers.

(k) “Motor Vehicle” refers to any self-propelled four-wheeled road vehicle
designed to carry passengers including, but not limited to sedan, coupes, station
wagons, convertibles, pick-ups, vans, sports utility vehicles (SUV's) and Asian utility
vehicles (AUV's) but excepting motorcycle, delivery trucks, dump trucks, buses, road
rollers, trolley cars, street sweepers, sprinklers, lawn mowers and heavy equipment,
such as, but not limited to bulldozers, pay loaders, graders, forklifts, amphibians trucks,


cranes and vehicles which run only on rails or trucks or tractors, trailer 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 power rating

(!) “Non-Conformity” refers to any defect or condition that substantially impairs
the use, value or safety of a brand new motor vehicle which prevent it from conforming
to the manufacturer's or distributor's standards or specifications, which cannot be
repaired, but excluding conditions resulting from non-compliance by the consumer of his
obligation under his obligations under the warranty, modifications not authorized by the
manufacturer or distributors, 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 Right Period” refers to the period provided for under the contract of
sale when the manufacturer would guarantee the material used, workmanship and
roadworthiness of a brand new motor vehicle for ordinary use or reasonable intended
purposes.

SECTION 4 Coverage.- This Act shall cover brand new motor vehicle with non-
conformity reported by the consumer within (12) months from 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 shall be excluded.

Non-compliance of the consumer of his obligations under the warranty;
Modification not authorized by the manufacturer or distributor;

Abuse or neglect of the brand new motor vehicle; and

Damage to the vehicle due to an act accident or force majeure.

aocn

SECTION 5. Repair Attempt -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 result of the said
repairs, may invoke his right 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,
distributors, authorized dealer or retailer of the resolved 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.

SECTION 7. Availment of Lemon Rights - Subsequent to the filing of
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 complaints to his satisfaction

It shall be the duty of the manufacturer, distributor, authorized dealer or
retailer, upon receipt of the motor vehicle and the notice of non-conformity
required under Section 6 hereof, to attend to the complaint of the consumer
including, as may be necessary, make the repairs and undertake such actions to
make the vehicle conform to the standards or specifications of the manufacturer
or distributors of 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 with the DTI as provided 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 right period, the repair is deemed successful; Provided, finally, That in
event the consumer still unsatisfied after the thirty (30) days period, still within
the lemon law period, the consumer may be allowed to avail of the same
remedies under section 5 and 6 hereof,

Nothing herein shall be construed to limit or impair the rights and remedies
of a consumer under any 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 DTI
in accordance with the following resolution mechanism;

8.1 Mediation

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

b. In the course of the 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 consumer's complaint. Any cost
incurred in establishing the validity of the consumer's complaint shall
be born jointly by the consumer and the dealer manufacturer,

c, The complaint shall be deemed valid if it is independently establish that
the vehicle does not conform to the standard or specifications set by
the manufacturer.

d. Upon failure of negotiation or mediation between the manufacturer or
distributor and consumer, the parties shall execute a certificate
attesting to such failure;

e. Atany time during the dispute resolution period, the manufacturer or
distributor and the consumer shall be encouraged to settle amicably.
All disputes that have been submitted for mediation shall be settled not
more than forty (40) working days from the date of filing of the
complaint with the DTI.

8.2 Arbitration

(a) In the event there is failure to settle the complaint during the
mediation proceedings, the parties may voluntary enter into
arbitration proceedings, likewise to be supervised by the DTI. The
DTI shall rely on the independent findings in conformity to the
standard and specification established herein;

(b) In case a non-conformity of the vehicle is found established 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;

i, Replace the motor vehicle with a similar or comparable
motor vehicle in terms of specification 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-manufacturer, the
consumer shall pay the non-conforming vehicle.

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,

(0) 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 cost incurred
by the latter in validating the consumer's complaint.

SECTION 9, Determination of Reasonable Allowance for Use — For the purpose
of this Act. “reasonable allowance for use" shall mean twenty per cent (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), whichever is higher.

SECTION 10. Disclosure of 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 non-conformity 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 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 for a minimum amount of One Hundred
Thousand (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.

SECTION 12, Assistance by Other Agencies. - The Department of
Transportation and Communication 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 provision of this Act

SECTION 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.

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

SECTION 15. Repealing Clause — Alll 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 national newspaper of
general circulation.

Approved