Republic of the Philippine]
HOUSE OF REPRESENTAT!
Quezon City

First Regular Session
SIXTEENTH CONGRESS

House Bill No. 244

Introduced by Rep. Maria Carmen S. Zamora

EXPLANATORY NOTE

In the United States, the so called Lemon Laws of the various states of the
Union were enacted for the express purpose of protecting consumers from buying
new, but faulty, motor vehicles. These laws seek to make sure that the
manufacturer of the vehicle fixes the problems or defects that were originally
covered under the manufacturer’s warranty and were reported by the owner
within the so called lemon law rights period or certain mileage as reflected by the
odometer of the vehicle. in exteme cases where the factory defects of the car are
the laws also warrant the refund of the consumer's money or the

Republic Act No, 7394 or the Consumer Protection Law in
ippines provides for the protection of consumers from scheming
manufacturers and defective products. It gives the Department of Health (DOH)
jurisdiction with respect to food, drugs, cosmetics, devices and substances; the
Department of Agriculture (DA) with respect to products related to agriculture:
of Trade and Industry (DTI) with respect to other consumer

: ions. DTI, therefore, has sole
cles.

average 100,000 units of sold new automobiles per year, about
100 of these ate later reported to be suffering from factory defects. Complaints
-eceived 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. Hence, the need for
proposal to bolster the Consumer Protection Act by specifically focusing on

lemon cars.

ring the 13" Congress

£ Representatives. Both
ing. Unfortunately,



what prevented its passage into law was that while the Senate ratified the
bicameral conference committee report on the bill, the House of Representatives
was unable to favorably act on the same due to time constraints.

This refiled version of the proposal is the same version adopted by the
members of the bicameral conference committee during the 13" Congress. It
incorporates and represents the various proposals of the stakeholders of the car
manufacturing industry, consumer protection organizations, the concerned
agencies of government and individual consumers. All of these groups actually
actively participated and unselfishly lent their time and effort in crafting this piece
of legislation. It is, therefore, a version most acceptable to all concerned. As such,
we see no reason why this bill should get snagged by the legislative mill again
and its passage compromised by all the legislative processes it has to get through.
During the 14" and 15" Congresses, the proposal was passed on third reading by
the House of Representatives but the Senate was not able to approve a parallel
measure.

It is hoped that during the 16" Congress, the bill will be expeditiously
acted upon and finally enacted into law as it is timely, beneficial and necessary.

MARIA C. IN % ZAMORA


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

First Regular Session
SIXTEENTH CONGHS
4

House Bill

Introduced by Rep. Maria Carmen S, Zamora

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

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assemble

SECTION 1, 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 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.

Ther 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 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 fees paid to the Land Transportation Office for
the registration of a brand new vehicle.

(©) “Comparable Motor Vehicie” 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.

“Dealer” or “Seller” refers to any person other than « manufacturer which
sells motor vehicles to the publi

(® “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 Agency” refers to the Department of Trade and Industry
(TD.

(h) “Lemon Law Rights Period” refers to the period ending twelve (12) months
afier 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 shail be the period during which
the consumer can report any non-conformity to the manufacturer, distributor,
authorized dealer or retailer, and pursue any right provided for under this
Act.

“Manufacturer” refers to @ person, partnership, sssociation, corporation or
entity engaged in business manufacturing or assembling motor vehicles, or
distributing motor vehicles to motor vehicle dealers.

(i) “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 agricultura 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) “Non-conformity” refers to any condition 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 accident, force majeure, abuse, neglect, or
unauthorized modification or alteration of the brand new motor vehicte.

(1) “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.



(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.

‘Warranty Rights Period” refers to the period provided for under the contract
of sale when manufacturer would guarantee the materials used, workmanshi
and fitness 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 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 shail 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 accident o 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 sti! unsatisfied with the results of the
said repairs, may invoke his rights under this Act.

SEC. 6, Notice of Avaiiment 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 unresoived 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 shal! clearly state the manner and form of such notice to

«constitute 2 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 wes purchased for a final attempt to
address the consumer's complaint’s to his satisfaction,

distributor, authorized dealer or
ce of availment referred to
he consumer including, as
fh sotions as to make
¢ manufacturer or

It shall be the duty of the manufactur
retailer, upon receipt of the motor vehicie and the n
1 Section 6, hereof, to attend to the complainant of
may be necessary, making such repairs and underaking
the vehicle conform to the standards or specifications
distributor for such vehicle.



Jn 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 under
this Act, Provided, however, That if the vehicle is not returned for repair for 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 under the
availment of lemon law rights period, the repair is deemed successful; Provided,
Finally, That should the same defect recur following the thirty (30) day period,
‘after the lemon law rights period shall have lapsed, the consumer may still avail
of the same remedies under Section 5 and 6 hereof.

‘Fo compensate for the non-usage of the vehicle while under repair and
during the period of availment of lemon law rights, the consumer shall be
provided a reasonable daily transportation allowance equivaient to first class taxi,
in such amount to be agreed upon by the parties, or a service vehicle at the option
of 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 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 settied by the DTI in
accordance with the following dispute resolution mechanisms:

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 its dispute resolution efforts, the DTI shall endeavor
10 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 comp
shall be borne jointly by the consumer and the deaier-manufacturer.

(©) 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.

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



(e) 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 amicabie 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 compiaint with the DTT.

8.2. Arbitration

(a) In the event there is 2 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.

(b) 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-
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

(ii) accept the return of the motor vehicle and pay the
consumer the purchase price pius the collateral
charges.

(©) In case a non-conformity of the vehicle is not found by the DTI,
it shall rule in favor of the desler-manufacturer and direct the
consumer to reimburse the dealer-manifacturer the costs incurred

. by the latter in validating the consumer’s complaints.

SEC. 9, 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 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

(©) the condition of the motor vehicle at the time of the transfer to the
dealer.


It shell be the responsibility of the dealer to make the same disclosure in
writing, in turn, to the next purchaser prior to sale. A delaer’s
responsibility under this section shall cease upon the sale of the affected
motor vehicle to the first purchaser.

SEC 10. Penalty —The manufacturer, distributor or dealer adjudged to have violated the
provisions requiring disclosure es mentioned in the preceding section shall be liable to
“mum amount of One hundred thousand pesos (P100,000.00) as damages to the
Begrieved party without prejudice to any civil or criminal liability they and/or the
responsible officer may incur under exisiting laws

SEC, it. Assistance by Other Ageneies—The Department of Transportation and
“= agencies, political subdivisions, local government units,
‘olied corporations, shall render such assistance as
:plernent the provisions of this Act.

plementing Rules and Regulations—The Department of Trade and
Industry shal! promulgate the necessary implementing rules and regulations within ninety
the effectivity of this Act.

SEC. 13, Separability Clause.If, for any reason, any part or provision of this
‘Act is Geclared invalid, such declaration shall not affect the other provisions of

1 laws, decrees, rales or regulations or paris thereof,
is Act, are hereby deemed repealed,

spesling Clause.
which are inconsistent with the provi
amended or modified according!

SEC 15, Bffectivity. This Act shall take effect fifteen (15) days after its publication in
the Official Gazette or in two national newspapers of general circulation.

Approved