First, we have to mention that prior to this new law,
car buyers turned to the Civil Code provisions on warranties against hidden defects
(Arts 1561-1581). Under the Civil Code, car
buyers have “6 months, from the delivery of the thing sold” (Art. 1571) to “elect
between withdrawing from the contract and demanding a proportionate reduction
of the price, with damages in either case” (Art 1567).
Now here comes Republic Act No. 10642, “AN ACT
STRENGTHENING CONSUMER PROTECTION IN THE PURCHASE OF BRAND NEW MOTOR VEHICLES” has been signed into law and is set to take effect on August 7, 2014 (The
Philippine Star, July 20, 2013, p. B-2). This new “Philippine Lemon Law” has
laudable objectives as it seeks to “to promote full protection to the rights of
consumers in the sale of motor vehicles against business and trade practices
which are deceptive, unfair or otherwise inimical to consumers and the public
interest.” In addition, it recognizes
that “a motor vehicle is a major consumer purchase or investment and the rights
of consumers should be clearly defined, including the means for redress for
violations thereof (Section 2)”.
But a law truly
aimed to protect consumers from defective products should at the onset already
provide the alternative remedies of repair, replacement or refund. This law does not and actually gives car manufacturers,
distributors, dealers or retailers plenty of ways to delay a refund or
replacement and even opportunities to earn from the defective product.
Period of
Protection:
1 year or 20
kilometers
It should be noted that only brand-new vehicles are
covered and provided that a “nonconformity” (non-repairable defect, to the layman)
occurs within 12 months from delivery or up to 20,000 kilometers, whichever
comes first”:
“SEC. 4. Coverage. – This Act shall cover brand
new motor vehicles purchased in the Philippines reported by a consumer
to be in nonconformity with the vehicle’s manufacturer or distributor’s
standards or specifications within twelve (12) months from the date of original
delivery to the consumer, or up to twenty thousand (20,000) kilometers of operation
after such delivery, whichever comes first. xxx”
A 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 (Section 3 [k]).”
Unfortunately and inexplicably, only four-wheel
passenger vehicles are included. Purchasers of motorcycles, scooters and heavy
equipment will just have to seek relief elsewhere. Under the Act -
“Motor vehicle refers to any self-propelled, four (4)
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 excluding
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 (Section 3 [j]);”
There can be no claim if the “nonconformity” arises
from: “(a) Noncompliance by the consumer of the obligations under the warranty;
(b) Modifications not authorized by the manufacturer, distributor, authorized
dealer or retailer; (c) Abuse or neglect of the brand new motor vehicle; and (d)
Damage to the vehicle due to accident or force majeure (Section 4).” A purchaser would be well-advised not to
dress up or modify his vehicle lest this void his possible claims under this
law. Or he should get written confirmation that it is authorized.
The law may have been initially
drafted to protect consumers but we wonder how much influence car manufacturers, distributors, dealers or retailers had in the final result.
3 plus 1
strikes
It could be supposed that for a brand new car, 1 or 2 repair
attempts should be enough to correct the problem. However, 4 attempts is what the law allows. And having a replacement assembly so early
seems doubtful. And from when will the
12 months for the new assembly be reckoned from?
What benefits does the law give to the consumer? After
four strikes, the manufacturer, distributor, authorized dealer or retailer may
be out. There are only four (4) repair attempts allowed. However, these should be performed by the same entity. A buyer should be wary of any attempt for the
repairs to be passed on to another party.
“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 manufacturer,
distributor, authorized dealer or retailer for the same complaint, and the nonconformity issue remains
unresolved, the consumer may invoke his or her rights under this Act. (Emphasis
supplied)
The repair may include replacement of parts
components, or assemblies.”
Requirement
for Notice
If
the 4 repairs prove unavailing, then the consumer should send a written notice,
the form of which must be based on what is prescribed in the warranty booklet.
Why was discretion both for the manner and form of the notice given to the car
sellers in this case? It is worrying
that unduly burdensome requirements may be imposed when a simple e-mail or
facsimile should suffice.
“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. It shall also clearly
state the responsibility of the consumer under this section.” (Emphasis
supplied)
3 plus 1
plus another one!
But wait, after 4 repair opportunities and the buyer
having sent the notice, the seller is given one final opportunity to remedy the
matter! Considering how long some
repairs might take, a buyer may just about consume almost a year just waiting
for his car to be fixed. And if the car
doesn’t run or does not run well or safely, how is he is supposed to bring it
in for repairs? If it’s towed, who pays for it?
“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 manufacturer, distributor, authorized
dealer or retailer from where 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 repairs and
undertaking such actions to make the vehicle conform to the standards or
specifications of the manufacturer, distributor, authorized dealer or retailer
for such vehicle.”
One better return the vehicle within 30 days after
this “final attempt” or else it is deemed successful and everything can start
all over again! Section 7 states 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 that the nonconformity issue still exists or persists
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.” Woe to you if a different
problem manifests itself as only the “same complaint” is covered.
Filing the
Complaint
If the conformity persists, the consumer may then file
a complaint before the DTI. But wait,
wasn’t this venue open to the consumer even before this law was passed? Anyway, under the Lemom Law –
“In case the nonconformity issue remains unresolved
despite the manufacturer, distributor, authorized dealer or retailer’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: xxx (Section 7)”.
Transportation
Allowance
The new law does give the consumer a transportation
allowance during the time of non-usage and while availing of his Lemon law
rights. We trust that the allowance is due
as early as when the first repair was made necessary.
“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, an
amount which covers the transportation of the consumer from his or her
residence to his or her regular workplace or destination and vice versa,
equivalent to air-conditioned taxi fare, as evidenced by official receipt, or
in such amount to be agreed upon by the parties, 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 7).”
While useful, it does not take into account the added
hassle of finding a taxi during rush hour.
Dispute
Resolution
The consumer will then go before the DTI for mediation
with the costs thereof to be borne jointly by the parties (Section 8). Why not let the winning party recover his
losses, costs and expenses? If this is unsuccessful,
then the dispute will be resolved by either arbitration, if voluntarily agreed
upon by both parties or an adjudication before the DTI which can be commenced
by either party.
SEC. 8. Remedies for Dispute Resolution. – The DTI
shall exercise exclusive and original jurisdiction over disputes arising from
the provisions of this Act. Thus, car buyers can no longer go straight to court
but have to go through dispute resolution first before the DTI. And remember,
DTI dispute resolution only happens after 5 repair attempts. 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 principles of negotiation, conciliation and
mediation towards amicable settlement between the manufacturer, distributor,
authorized dealer or retailer and the 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 qualified 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 manufacturer, distributor, authorized dealer or retailer;
(3) The complaint shall be deemed valid if it is
independently established that the motor vehicle does not conform to the
standards or specifications set by the manufacturer, distributor, authorized
dealer or retailer (shouldn’t this determination already settle the
matter in the consumer’s favor?) ;
(4) Upon failure of the negotiation or mediation
between the manufacturer, distributor, authorized, dealer or retailer 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, distributor, authorized dealer or retailer and the consumer
shall be encouraged to settle amicably. All disputes that have been submitted
for mediation shall be settled not later than ten (10) working days from the
date of filing of the complaint with the DTI.
(b) Arbitration
In the event there is a failure to settle the
complaint during the mediation proceedings, both parties may voluntarily decide
to undertake arbitration proceedings.
(c) Adjudication
(1) In the event that both parties do not undertake
arbitration proceedings, at least one of the parties may commence adjudication
proceedings, administered by the DTI. The DTI shall rely on the qualified
independent findings as to conformity to standards and specifications
established herein. In no case shall adjudication proceedings exceed twenty
(20) working days;
(2) In case a finding of nonconformity is arrived at,
the DTI shall rule in favor of the consumer and direct the manufacturer,
distributor, authorized dealer or retailer 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 specifications and values, subject to
availability; or
(ii) 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 manufacturer,
distributor, authorized dealer or retailer, the consumer shall pay the
difference in cost.
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 nonconforming motor vehicle (Amazing. Charging the consumer for using a defective product which he
was not allowed to have replaced or returned and be refunded for in the first
place); and
(3) In case a nonconformity of the motor vehicle is
not found by the DTI (which nonconformity
was already determined upon filing of the complaint), it shall rule in
favor of the manufacturer, distributor, authorized dealer or retailer, and
direct the consumer to reimburse the manufacturer, distributor, authorized
dealer or retailer the costs incurred by the latter in validating the
consumer’s complaints.”
The term “reasonable allowance for use” shall be
computed at “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 lower
(Section 9).” Why does have one to pay
20% for a vehicle which failed to run correctly in the first place and still
doesn’t do so after 5 repair attempts?
Collateral charges are “fees paid’ to the Land
Transportation Office (LTO) for the registration of a brand new motor vehicle
and other incidental expenses such as, but not limited to, the cost of
insurance pertaining to the vehicle, chattel mortgage fees and interest
expenses if applicable (Section 3 [b]).” [Italics supplied]
The decision can be appealed to the DTI Secretary on
grounds of: “(i) Grave abuse of discretion; (ii) The decision/order is in
excess of jurisdiction or authority of the Adjudication Officer; and (iii) The
decision/order is not supported by the evidence or there is serious error in
the findings of facts.” This is to be
decided within thirty (30) days. If unsatisfied with the decision, a party may only
file a case for certiorari with the Court of Appeals under Section 4, Rule 65
of the Revised Rules of Court. (Section 8)
The vehicle in question can still be resold subject to
a proper disclosure on certain facts on pain of being held liable for damages
in the amount of One hundred thousand pesos (P100,000.00) “without prejudice to
any civil or criminal liability they and/or the responsible officer may incur
under existing laws (Section 11).” After
this disclosure, the “lemon law rights” seem to disappear although it is
unclear what “section” is being referred to:
“SEC. 10. Disclosure on Resale. – Should the returned
motor vehicle be made available for resale, the manufacturer, distributor,
authorized dealer or retailer shall, prior to sale or transfer, disclose in
writing to the next purchaser of the same vehicle the following information:
(a) The motor vehicle was returned to the
manufacturer, distributor, authorized dealer or retailer;
(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 manufacturer, distributor, authorized dealer or retailer.
The
responsibility of the manufacturer, distributor, authorized dealer or retailer
under this section shall cease
upon the sale of the affected motor vehicle to the first purchaser.” (Emphasis
supplied)
The Implementing Rules are still to be issued but,
offhand, the law does not seem to add that much in terms of consumer protection
except to clarify the possible entitlement to transportation allowance. Worse, a consumer can be in the hole for the
“reasonable allowance for use” of a clearly defective vehicle. What does one do
when the legislators give you a law that appears to be a lemon? Unfortunately, there is no law against that
yet and our only remedy is to replace them (the law and maybe the lawmaker).
