Regulation of Repair and Service Firms

The following are the minimum requirements for accreditation for repair and service firms:

  1. the duly registered business name, firm name, or style of the firm;
  2. date of issue and effectivity of the certificate of accreditation;
  3. number and skills of technical personnel; and
  4. required license for the repair or servicing of any consumer product as required by special laws.[1]

No person is to operate a repair and service firm or act as technical personnel therein without first being accredited by the DTI.[2]

 

– – –

[1] R.A. 7394, Article 127.

[2] Ibid. Article 128.

Advertising and Sales Promotion

What constitutes advertising

Advertising is “the business of conceptualizing, presenting or making available to the public, through any form of mass media, fact, data or information about the attributes, features, quality or availability of consumer products, services or credit.” [1] Advertisement is “the prepared and through any form of mass medium, subsequently applied, disseminated or circulated advertising matter.”[2] Advertising agency or agent is “a service organization or enterprise creating, conducting, producing, implementing or giving counsel on promotional campaigns or programs through any medium for and in behalf of any advertiser.”[3]

Continue reading “Advertising and Sales Promotion”

Liability for Product and Service (Product Liability)

Liability for the defective products

Any Filipino or foreign manufacturer, producer, and any importer, are liable for redress, independently of fault, for damages caused to consumers by defects resulting from design, manufacture, construction, assembly and erection, formulas and handling and making up, presentation or packing of their products, as well as for the insufficient or inadequate information on the use and hazards thereof.[1]

Continue reading “Liability for Product and Service (Product Liability)”

Labeling and Fair Packaging under the Consumer Act

Prohibited acts on labeling and packaging

It is unlawful for any person, either as principal or agent, engaged in the labeling or packaging of any consumer product, to display or distribute, or to cause to be displayed or distributed in commerce, any consumer product whose package or label does not conform to the provisions of the law.[1]

Continue reading “Labeling and Fair Packaging under the Consumer Act”

Consumer Product and Service Warranties

Applicable law on warranties under the Consumer Act

The provisions of the Civil Code on conditions and warranties primarily govern all contracts of sale with conditions and warranties.[1] The Consumer Act provides for additional rules on warranties as provided below.

Rules on Warranties
Consumer Code

In addition to the Civil Code provisions on sale with warranties, the following provisions are to govern the sale of consumer products with warranty:[2]

(1) Terms of express warranty – Any seller or manufacturer who gives an express warranty are required to:[3]

a. Set forth the terms of warranty in clear and readily understandable language and clearly identify himself as the warrantor;[4]

b. Identify the party to whom the warranty is extended;[5]

c. State the products or parts covered;[6]

d. State what the warrantor will do in the event of a defect, malfunction of failure to conform to the written warranty and at whose expense;[7]

e. State what the consumer must do to avail of the rights which accrue to the warranty;[8] and

f. Stipulate the period within which, after notice of defect, malfunction or failure to conform to the warranty, the warrantor will perform any obligation under the warranty.[9]

(2) Express warranty is operative from moment of sale – All written warranties or guarantees issued by a manufacturer, producer, or importer are to be operative from the moment of sale.[10]

a. Sales report – All sales made by distributors of products covered by this rule are to be reported to the manufacturer, producer, or importer of the product sold within 30 days from date of purchase, unless otherwise agreed upon.[11]

b. Failure to make or send report – Failure of the distributor to make the report or send them the form required by the manufacturer, producer, or importer relieves the latter of the liability under the warranty.[12] Further, the distributor who failed to comply with its obligation to send the sales reports are to personally liable under the warranty.[13]

c. Retail – The retailer is subsidiarily liable under the warranty in case of failure of both the manufacturer and distributor to honor the warranty. Thus, the retailer is to shoulder the expenses and costs necessary to honor the warranty.[14]

d. Enforcement of warranty or guarantee – The warranty rights can be enforced by presentment of a claim. The purchaser needs only to present to the immediate seller either the warranty card or the official receipt along with the product to be serviced or returned to the immediate seller. No other documentary requirement is to be demanded from the purchaser. The warranty is to be immediately honored: (a) by the immediate seller if it is the manufacturer’s factory or showroom; or (b) by the distributor if the product was purchased from it. In the case of a retailer other than the distributor, the retailer is to take responsibility without cost to the buyer upon presenting the warranty claim to the distributor in the consumer’s behalf.[15]

e. Record of purchases – Distributors and retailers covered by this rule are to keep a record of all purchases covered by a warranty or guarantee for such period of time corresponding to the lifetime of the product’s respective warranties or guarantees.[16]

f. Contrary stipulations: null and void – All covenants, stipulations, or agreements contrary to the provisions of this rule are void and without legal effect.[17]

(3) Designation of warranties – A written warranty is required to clearly and conspicuously designate such warranty as:[18]

a. Full warranty – if the written warranty meets the minimum requirements set forth in No. 4 below;[19] or

b. Limited warranty – if the written warranty does not meet such minimum requirements.[20]

(4) Minimum standards for warranties – For the warrantor of a consumer product to meet the minimum standards for warranty, he is to:[21]

a. Remedy such consumer product within a reasonable time and without charge in case of a defect, malfunction or failure to conform to such written warranty;[22]

b. Permit the consumer to elect whether to ask for a refund or replacement without charge of such product or part, as the case may be, where after reasonable number of attempts to remedy the defect or malfunction, the product continues to have the defect or to malfunction.[23]

c. The warrantor is not to be required to perform the above duties if he can show that the defect, malfunction, or failure to conform to a written warranty was caused by damage due to unreasonable use thereof.[24]

(5) Duration of warrantyThe seller and the consumer may stipulate the period within which the express warranty are enforceable. If the implied warranty on merchantability accompanies an express warranty, both will be of equal duration.[25] Any other implied warranty is to endure not less than 60 days nor more than one year following the sale of new consumer products.[26]

(6) Breach of warranties – Breach of warranties are subject to the following:

a. In case of breach of express warranty, the consumer may elect to have the goods repaired or its purchase price refunded by the warrantor. In case the repair of the product in whole or in part is elected, the warranty work must be made to conform to the express warranty within 30 days by either the warrantor or his representative. The 30-day period may be extended by conditions which are beyond the control of the warrantor or his representative. In case the refund of the purchase price is elected, the amount directly attributable to the use of the consumer prior to the discovery of the non-conformity is to be deducted.[27]

b. In case of breach of implied warranty, the consumer may retain in the goods and recover damages, or reject the goods, cancel the contract and recover from the seller so much of the purchase price as has been paid, including damages.[28]

De Guzman v. Toyota Cubao, Inc.
G.R. No. 141480, 29 November 2006

Plaintiff Carlos B. De Guzman initiated a complaint against defendant Toyota Cubao, Inc., for damages. Prior to the case, plaintiff purchased from defendant a white Toyota Hi-Lux 2.8 SS double cab motor vehicle for Php508,000.00. After 19 months from date of delivery, plaintiff demanded the replacement of the car’s engine as it developed a crack. Defendant responded that such damage was not covered by the warranty. Hence, plaintiff initiated this case which was subsequently dismissed by the trial court on the ground that his cause of action had prescribed following the 6 month rule in implied warranty under the Civil Code. On appeal, plaintiff claimed that the 1 year rule in the Consumer Code should have been applied.

HELD: Defendant was not liable. In the Civil Code, an implied warranty has a prescription of 6 months. “By filing this case, [plaintiff] wants to hold [defendant] responsible for breach of implied warranty for having sold a vehicle with defective engine.” Unfortunately, plaintiff’s cause of action had been time-barred as he did not exercise his right within six months from delivery of the thing sold as required under the Civil Code. He filed the case after 19 months from delivery. Even if the implied warranty under the Consumer Code is applied, the case will still be dismissed as the 1 year prescriptive period has also lapsed.

Warranties in supply of services

In every contract for the supply of services to a consumer made by a seller in the course of a business, there is an implied warranty that the services are to be rendered with due care and skill and that any material supplied in connection with such services will be reasonably fit for the purpose for which it is supplied.[29]

Reasonably fit for the purpose bought

If a seller supplies consumer services in the course of a business and the consumer, expressly or by implication, makes known to the seller the particular purpose for which the services are required, there is an implied warranty that the services supplied under the contract and any material supplied in connection therewith will be reasonably fit for that purpose or are of such a nature or quality that they might reasonably be expected to achieve that result, unless the circumstances show that the consumer does not rely or that it is unreasonable for him to rely, on the seller’s skill or judgment.[30]

Best Legal Practices

Specify in detail as to what would make a service “reasonably fit for the purpose bought” – To avoid doubts, the parties should expressly stipulate agree what would make a service “reasonably fit for the purpose bought.”

Professional services

The provision of the rules on warranty do not apply to professional services rendered by certified public accountants, architects, engineers, lawyers, veterinarians, optometrists, pharmacists, nurses, nutritionists, dietitians, physical therapists, salesmen, medical and dental practitioners, and other professionals engaged in their respective professional endeavors.[31]

Guaranty of service firms

Service firms are to guarantee workmanship and replacement of spare parts for a period not less than 90 days which period is to be indicated in the pertinent invoices.[32]

Prohibited acts

The following acts are prohibited:

  1. Refusal without any valid legal cause by the local manufacturer or any person obligated under the warranty or guarantee to honor a warranty or guarantee issued;[33]
  2. Unreasonable delay by the local manufacturer or any person obligated under the warranty or guarantee in honoring the warranty;[34]
  3. Removal by any person of a product’s warranty card for the purpose of evading said warranty obligation;[35] and
  4. Any false representation in an advertisement as to the existence of a warranty or guarantee.[36]

 

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[1] Ibid. Article 67. The DTI is to strictly enforce the provisions consumer product and service warranties (Article 66, Ibid.)

[2] Ibid. Article 68.

[3] Ibid. Article 68 (a).

[4] Ibid. Article 68 (a) (1).

[5] Ibid. Article 68 (a) (2).

[6] Ibid. Article 68 (a) (3).

[7] Ibid. Article 68 (a) (4).

[8] Ibid. Article 68 (a) (5).

[9] Ibid.7394, Article 68 (a) (6).

[10] Ibid. 7394, Article 68 (b).

[11] Ibid. Article 68 (b) (1). The report must contain, among others, the date of purchase, model of the product bought, its serial number, name and address of the buyer. The report made in accordance with this provision is equivalent to a warranty registration with the manufacturer, producer, or importer. Such registration is sufficient to hold the manufacturer, producer, or importer liable, in appropriate cases, under its warranty (Ibid.).

[12] Ibid. Article 68 (b) (2). For this purpose, the manufacturer shall be obligated to make good the warranty at the expense of the distributor (Ibid.).

[13] Ibid. Article 68 (b) (2). For this purpose, the manufacturer shall be obligated to make good the warranty at the expense of the distributor (Ibid.).

[14] Ibid. Article 68 (b) (3). Nothing therein prevents the retailer from proceeding against the distributor or manufacturer (Ibid).

[15] Ibid. Article 68 (b) (4).

[16] Ibid. Article 68 (b) (5).

[17] Ibid. Article 68 (b) (6).

[18] Ibid. Article 68 (c).

[19] Ibid. Article 68 (c) (1).

[20] Ibid. Article 68 (c) (2).

[21] Ibid. Article 68 (d).

[22] Ibid. Paragraph 1, Article 68 (d) (1).

[23] Ibid. Paragraph 1, Article 68 (2).

[24] Ibid. Paragraph 2, Article 68.

[25] Ibid. Paragraph 1, Article 68 (e).

[26] Ibid. Paragraph 2, Article 68 (e).

[27] Ibid. Article 68 (f) (1).

[28] Ibid. Article 68 (f) (2).

[29] Ibid. Article 69 (a).

[30] Ibid. Article 69 (b).

[31] Ibid. Article 70.

[32] Ibid. Article 71.

[33] Ibid. Article 72 (a).

[34] Ibid. Article 72 (b).

[35] Ibid. Article 72 (c).

[36] Ibid. Article 72 (d).

Regulation of practices relative to weights and measures

Sealing and testing of instruments of weights and measures

All instruments for determining weights and measures in all consumer related transactions are required to be tested, calibrated, and sealed every six  months by the official sealer who must be the provincial, city, municipal treasurer (or his authorized representative) upon payment of fees required under existing law.[1] Such instruments are to be continuously inspected for compliance with the provisions of the law.[2]

Best Legal Practices

Obtain seal from the concerned local government unit – Businesses engaged in weighing and measuring consumer related transactions should obtain the official seal from the concerned local government unit. Thereafter, such seal should never be tampered as the same will be inspected regularly.

Use of metric system

The system of weights and measures to be used for all products, commodities, materials, utilities, services and commercial transactions, in all contracts, deeds and other official and legal instruments and documents are to follow the metric system, in accordance with existing laws and their implementing rules and regulations.[3]

Fraudulent practices relative to weights and measures

The following are prohibited acts as they are fraudulent practices relative to weights and measures:[4]

  1. For any person other than the official sealer or his duly authorized representative to place or attach an official tag, seal, sticker, mark, stamp, brand, or other characteristic sign, used to indicate that such instrument of weight or measure has officially been tested, calibrated, sealed or inspected;[5]
  2. For any person to imitate any seal, sticker, mark, stamp, brand, tag or other characteristic sign used to indicate that such instrument of weight or measure has been officially tested, calibrated, sealed or inspected;[6]
  3. For any person other than the official sealer or his duly authorized representative to alter, in any way, the certificate or receipt given by the official sealer or his duly authorized representative as an acknowledgment that the instrument for determining weight or measure has been fully tested, calibrated, sealed or inspected;[7]
  4. For any person to make or knowingly sell or use any false or counterfeit seal, sticker, brand, stamp, tag, certificate, or license, or any dye for printing or making the same or any characteristic sign used to indicate that such instrument of weight or measure has been officially tested, calibrated, sealed or inspected;[8]
  5. For any person other than the official sealer or his duly authorized representative to alter the written or printed figures, letters or symbols on any official seal, sticker, receipt, stamp, tag, certificate or license used or issued;[9]
  6. For any person to use or reuse any restored, altered, expired, damaged stamp, tag certificate, or license for the purpose of making it appear that the instrument of weight or measure has been tested, calibrated, sealed or inspected;[10]
  7. For any person engaged in the buying and selling of consumer products or of furnishing services the value of which is estimated by weight or measure to possess, use or maintain with intention to use any scale, balance, weight, or measure that has not been sealed or if previously sealed, the license therefor has expired and has not been renewed in due time;[11]
  8. For any person to fraudulently alter any scale, balance, weight, or measure after it is officially sealed;[12]
  9. For any person to knowingly use any false scale, balance, weight or measure, whether sealed or not;[13]
  10. For any person to fraudulently give short weight or measure in the making of a scale;[14]
  11. For any person, assuming to determine truly the weight or measure of any article bought or sold by weight or measure, to fraudulently misrepresent the weight or measure thereof;[15] or
  12. For any person to procure the commission of any such offense above-mentioned by another.[16]

Instruments presented for sealing

Instruments officially sealed at some previous time which have remained unaltered and accurate and the seal or tag officially affixed thereto remains intact, and in the same position and condition in which it was placed by the official sealer or his duly authorized representative if presented for sealing, are to be sealed promptly on demand by the official sealer or his authorized representative without penalty except a surcharge fixed by law or regulation.[17]

 

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[1] Ibid. Article 61. The provincial/city/municipal treasurers are to strictly enforce the provisions on regulation of practices relative to weights and measures: Provided, That, with respect to the use of the Metric System, it is to be enforced by the DTI (Article 60, Ibid.)

[2] Ibid. Article 61. The provincial/city/municipal treasurers are to strictly enforce the provisions on regulation of practices relative to weights and measures: Provided, That, with respect to the use of the Metric System, it is to be enforced by the DTI (Article 60, Ibid.)

[3] Ibid. Article 62. The DTI is mandated to adopt standard measurement for garments, shoes and other similar consumer products (Article 63, Ibid.).

[4] Ibid. Article 64.

[5] Ibid. Article 64 (a).

[6] Ibid. Article 65 (b).

[7] Ibid. Article 65 (c).

[8] Ibid. Article 65 (d).

[9] Ibid. Article 65 (e).

[10] Ibid. Article 65 (f).

[11] Ibid. Article 65 (g).

[12] Ibid. Article 65 (h).

[13] Ibid. Article 65 (i).

[14] Ibid. Article 65 (j).

[15] Ibid. Article 65 (k).

[16] Ibid. Article 65 (l).

[17] Ibid. Paragraph 2, Article 65.

Deceptive, Unfair and Unconscionable Sales Acts or Practices

What constitute deceptive acts or practices

An act or practice is deemed deceptive “whenever the producer, manufacturer, supplier or seller, through concealment, false representation of fraudulent manipulation, induces a consumer to enter into a sales or lease transaction of any consumer product or service.”[1] Without limiting the scope of the definition of what constitutes a deceptive act, the act or practice of a seller or supplier is deceptive when it represents that:[2]

  1. A consumer product or service has the sponsorship, approval, performance, characteristics, ingredients, accessories, uses, or benefits it does not have;[3]
  2. A consumer product or service is of a particular standard, quality, grade, style, or model when in fact it is not;[4]
  3. A consumer product is new, original or unused, when in fact, it is in a deteriorated, altered, reconditioned, reclaimed or second-hand state;[5]
  4. A consumer product or service is available to the consumer for a reason that is different from the fact;[6]
  5. A consumer product or service has been supplied in accordance with the previous representation when in fact it is not;[7]
  6. A consumer product or service can be supplied in a quantity greater than the supplier intends;[8]
  7. A service, or repair of a consumer product is needed when in fact it is not;[9]
  8. A specific price advantage of a consumer product exists when in fact it does not;[10]
  9. The sales act or practice involves or does not involve a warranty, a disclaimer of warranties, particular warranty terms or other rights, remedies or obligations if the indication is false; [11] and
  10. The seller or supplier has a sponsorship, approval, or affiliation he does not have.[12]

Prohibition against deceptive sales acts or practices

Deceptive sales acts or practices by a seller or supplier in connection with a consumer transaction are prohibited whether it occurs before, during, or after the transaction.[13]

What constitute unfair or unconscionable sales acts or practices

Unfair or unconscionable sales acts or practices are committed “whenever the producer, manufacturer, distributor, supplier or seller, by taking advantage of the consumer’s physical or mental infirmity, ignorance, illiteracy, lack of time or the general conditions of the environment or surroundings, induces the consumer to enter into a sales or lease transaction grossly inimical to the interests of the consumer or grossly one-sided in favor of the producer, manufacturer, distributor, supplier or seller.”[14] To determine if there is such a violation, the following circumstances are to be considered:

  1. That the producer, manufacturer, distributor, supplier or seller took advantage of the inability of the consumer to reasonably protect his interest because of his inability to understand the language of an agreement, or similar factors;[15]
  2. That when the consumer transaction was entered into, the price grossly exceeded the price at which similar products or services were readily obtainable in similar transaction by like consumers;[16]
  3. That when the consumer transaction was entered into, the consumer was unable to receive a substantial benefit from the subject of the transaction;[17]
  4. That when the consumer was entered into, the seller or supplier was aware that there was no reasonable probability for payment of the obligation in full by the consumer;[18] and
  5. That the transaction that the seller or supplier induced the consumer to enter into was excessively one-sided in favor of the seller or supplier.[19]

Prohibition against unfair or unconscionable sales acts or practices

Unfair or unconscionable sales acts or practices by a seller or supplier in connection with a consumer transaction are prohibited whether it occurs before, during or after the consumer transaction.[20]

Aowa Electronic Philippines, Inc. v.
Department of Trade and Industry

G.R. No. 189655, 13 April 2011

Plaintiff Department of Trade and Industry (DTI) initiated a case against defendant Aowa Electronic Philippines, Inc., for violations on the prohibition against deceptive sales acts or practices and unfair or unconscionable sales act or practices under the Consumer Act. From 2001 to 2007, plaintiff received around 273 consumer complaints against defendant. Thus, plaintiff initiated an investigation and subsequently found defendant liable. Plaintiff ordered, among others, for defendant to cease and desist from operating its business, the cancellation of its certificates of business registration, and payment of administrative fine of Php300,000.00. On appeal, defendant challenged the authority of plaintiff to initiate the case against the former.

HELD: Plaintiff was authorized by law. “It is indubitable that the DTI is tasked to protect the consumer against deceptive, unfair, and unconscionable sales, acts, or practices, as defined in Articles 50 and 52 of the Consumer Act.” After receiving the numerous consumer complaints against defendant Aowa, DTI properly initiated this case.

Further, plaintiff correctly held defendant liable. Defendant committed unfair or unconscionable sales act or practices when they enticed consumers “into purchasing their products by taking advantage of the latter’s physical or mental infirmity, ignorance, illiteracy, lack of time or the general conditions of the environment or surroundings. This is done by misrepresenting to the consumer that he/she has won a gift or is to receive some giveaways when in truth, these gifts can only be claimed or received upon purchase of an additional product or products, again misrepresented by [defendant to] be of high quality.  This is how [defendant] operates its business, and not simply as a means of promotional sale.”

Chain Distribution Plans or Pyramid Sales Schemes

Chain distribution plans or pyramid sales schemes are prohibited to be employed in the sale of consumer products.[21]

Best Legal Practices

Devise a legitimate multi-level marketing strategy supporting a business – Due to the numerous complaints involving Chain Distribution Plans or Pyramid Sales Schemes, legitimate multi-level marketing strategies are mistakenly associated with such schemes. The strategy of selling products through multi-level marketing is neither prohibited nor illegal. The primary aim of such marketing strategy should be to support the development of a business. If the strategy is meant only to enrich the marketer, it may be considered as a fraudulent scheme.

Home solicitation sales

Before conducting any home solicitation sale of any consumer product or service, a business entity is required first to obtain a DTI permit. After due notice and hearing, such permit may be denied, suspended, or revoked upon cause as provided by DTI rules and regulations.[22]

When conducted

Home solicitation sales may be conducted only between the hours of 9:00 am 7:00 p.m. of each working day.[23] However, such solicitation sales may be made outside the prescribed hours where the person solicited has previously agreed to it.[24]

By whom conducted

Home solicitation sales are only to be conducted by a person who has the proper identification and authority from his principal to make such solicitations.[25]

Receipts for home solicitation sales

Sales generated from home solicitation sales are to be properly issued receipts in compliance with existing laws, rules and regulations on sales transactions.[26]

Prohibited representations

Salesmen doing home solicitation are prohibited from representing that: (a) the buyer has been specially selected; (b) a survey, test or research is being conducted; or (c) the seller is making a special offer to a few persons only for a limited period of time.[27]

Referral sales

Referral selling plans may only be used in the sale of consumer products when the seller executes in favor of the buyer a written undertaking that will grant a specified compensation or other benefit to said buyer, in return for each and every transaction consummated by said seller with the persons referred by said buyer or for subsequent perfected sales that said buyer has helped the seller.[28]

 

– – –

[1] Ibid. Article 50.

[2] Ibid. Paragraph 2, Article 50.

[3] Ibid. Paragraph 2(a), Article 50.

[4] Ibid. Paragraph 2(b), Article 50.

[5] Ibid. Paragraph 2(c), Article 50.

[6] Ibid. Paragraph 2(d), Article 50.

[7] Ibid. Paragraph 2(e), Article 50.

[8] Ibid. Paragraph 2(f), Article 50.

[9] Ibid. Paragraph 2(g), Article 50.

[10] Ibid. Paragraph 2(h), Article 50.

[11] Ibid. Paragraph 2(i), Article 50.

[12] Ibid. Paragraph 2(j), Article 50.

[13] R.A. 7394 (Consumer Act of the Philippines), Article 50.

[14] Ibid. Paragraph 1, Article 52.

[15] Ibid. Paragraph 2, Article 52 (a).

[16] Ibid. Paragraph 2, Article 52 (b).

[17] Ibid. Paragraph 2, Article 52 (c).

[18] Ibid. Paragraph 2, Article 52 (d).

[19] Ibid. Paragraph 2, Article 52 (e).

[20] Ibid. Paragraph 1, Article 52.

[21] Ibid. Article 53.

[22] Ibid. Article 54.

[23] Ibid. Article 55.

[24] Ibid. Article 55.

[25] Ibid.  Article 56.

[26] Ibid. Article 57.

[27] Ibid. Article 58.

[28] Ibid. Article 59.