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)”.
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.
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:
(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.
In the event there is a failure to settle the complaint during the mediation proceedings, both parties may voluntarily decide to undertake arbitration proceedings.
(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).