Is the Lemon Law ripe for the picking?
(First in a series)
A complex, man-made creation such as an automobile, with thousands upon thousands of moving, interconnected parts, will inevitably encounter breakdowns one way or another. Philippine lawmakers now want to make sure that when these breakdowns do happen, there would be a legal perspective to protect both consumers and manufacturers.
House Bill 4841, titled “An Act Strengthening Consumer Protection in the Purchase of Brand New Motor Vehicles”—or the Lemon Law of 2011—would give buyers of brand new cars the right to demand a replacement “with a similar or comparable motor vehicle” if the first vehicle is discovered to have a factory defect. The buyer may also opt to return a defective vehicle and get a refund of its purchase price and collateral charges such as the vehicle registration fee.
Like the citrus fruit named after it, the nitty-gritties of the proposed HB are already getting mixed reviews.
Leslie Sy, auto enthusiast and Kotse.com writer who is knowledgeable on the Lemon Laws of other countries, said that the local version should have made it simpler to get consumer protection.
“Unfortunately, as it stands, it is more in favor for the car companies, or for people with money who can spend on lawyers to sort out the mess for them. No working-class person in their right mind would find it worth their time to do the process themselves, and this bill is supposed to be meant to protect them,” Sy shared with Inquirer Motoring.
He lamented that “the law is incomplete because the DTI guidelines are not yet written.”
Sy stressed that the Lemon Law has been written in a way to make it seem that the DTI would be acting as a mediator between the car company and car owner, thus turning the process into a slow and tedious affair.
“Anyone who has dealt with the DTI will know that that department is understaffed. Would this law also give the DTI the extra budget to handle the extra work? It doesn’t say so anywhere in the Lemon Law bill,” Sy quipped.
Sy sees another loose end in the bill: “The given protection of only 12 months is inadequate, given how some problems may occur later. I personally feel the length of protection should be longer, maybe equal to the car’s factory warranty (which may be two or more years). Why so long? Given a car something so heavily taxed by the government, it would just be ‘fair’ to compensate the common man with some extra consumer protection for the second most expensive thing one would be buying, after the real estate property.”
On the plus side, he said that the Lemon Law is better than nothing, providing the car owner some degree of compensation during the time the vehicle is in the shop, which is a service car or taxi allowances, but lamented that the “implementation of such is vague because of the lack of detail, something in which usually ends up working in favor of the car company.”
Sy concluded that, without the details on DTI guidelines and compensation fleshed out, the Lemon Law bill “might end up becoming unimplementable.”
Arnel Doria, former head of an automobile company and now road safety advocate, defined what a “lemon” car actually is. “A vehicle that breaks down repeatedly within a short duration of time is often referred to as a lemon. A Lemon Law is supposed to provide a remedy for buyers of vehicles that repeatedly fail to meet standards of quality and performance.”
‘Weak consumer protection act’
Doria added that in the absence of a Lemon Law, buyers would have to seek redress via the Consumer Protection Act, which, he assessed, has been “weak” in settling disputes. It also does not specify the parameters by which a car can be classified as a lemon, and when the buyer should be compensated.
“Hence, most buyers would prefer airing their concerns through the mass media and the Internet. Due to this lack of definition, on the other hand, some buyers tend to abuse the Consumer Protection Act by demanding on matters that may not be covered even by Lemon Laws of other countries,” he observed.
“Thus, an enactment of a law that would set the standards by which the buyers and manufacturers would settle any technical defect of the product(s) is a welcome development. This will benefit both the buyers and the manufacturers,” Doria analyzed.
Carmakers say ‘it’s a sweet deal’
Probably soured by years of dealing with disgruntled customers, who have sought government and media “protection,” carmakers have been consistent in their stand on the Lemon Law: They welcome it, for it would provide not only consumer protection, but would also protect their brands from undue accusations as there would now be a legal basis and definition of what a “lemon” car would be.
Lawyer Alberto B. Arcilla, managing director and chief operating officer of Chevrolet Philippines, stated that the rights of the buyer and the obligations of the manufacturer/seller must be clear from the start.
“A manufacturer’s warranty is what makes the manufacturer/seller legally responsible to the consumer. This comes as a form of a guarantee. There are express and implied warranties. What is written, printed, explained and accepted by the buyer as stated in the warranty manual should govern the rights, liabilities and general expectations of the parties of the transaction,” stressed Arcilla. “However,” he added, “there are also ‘implied’ warranties as provided by law and there are some ‘expected’ warranties in the mind of a buyer which the seller must to the best of their ability deliver as well.”
The core purpose of the Lemon Law would be most felt in what Arcilla explains next: “It is when the there is a breach of the express guarantees and warranties, and in occasions when the expectations of the buyer, whether implied or plainly expected, is not reached, then there is a need to provide a forum and process to determine the rights and liabilities of the parties concerned. This to mind will be addressed by a law that will provide a forum to objectively determine and resolve the conflicting interpretation of each one’s rights and liabilities.”
Arcilla added that the objective of the law must be clear, easy to understand and unambiguous. It must be simple, concise, precise and leaves no uncertainty. It should consider all who will be affected by the law. It should be accessible and comprehensible for all, and most importantly, it should have legal certainty, meaning it should be possible to foresee how the law will be applied.
Daniel M. Isla, president of Lexus Manila Inc., welcomes the development that a Lemon Law is being given the time of day by the country’s legislators. “It has been years since this was proposed, but this has not been given priority.”
Isla stressed that the Lemon Law should make it crystal clear what a “lemon” car is: “What should constitute a lemon car is any mechanical defect that the manufacturer cannot resolve after repeated efforts, which may thus compromise the safety of the driver and his passengers.
“The law must consider the fact that manufacturers cannot be liable for returns on the basis of customer whims such as a change of preference for aesthetic considerations. Likewise, any malfunctions resulting from the tampering of the vehicle from its original state cannot fall within the warranty,” said Isla.
Isla added that more details must be taken into account, such as the coverage of defects, the period by which complaints may be made, considering the depreciation of the vehicle from wear and tear, and more importantly, which government body would be chiefly responsible for decisions and execution of the implementing guidelines.
Gregorio T. Yu, chairman of CATS Motors Inc. (general distributor of Mercedes Benz, Chrysler, Jeep and Dodge in the Philippines) said “a well-crafted law that is fair would prevent abuses and would ensure that prices would be kept reasonable. At the same time, the rights of consumers will also be protected.”
Fresh from accompanying President Noynoy Aquino to the China state visit, Elizabeth Lee, former Chamber of Automotive Manufacturers of the Philippines president, told Inquirer Motoring that in the past years, the formal auto industry had worked closely with legislators and stakeholders in crafting a Lemon Law applicable to the Philippines.
“Auto industry players welcome the crafting of such a law. The key to its success would be to strengthen the protection of buyers while at the same time, establish and clearly define the rights and obligations of both buyers and sellers of motor vehicles in the country. Striking a reasonable balance between the rights of the buyers and rights of the seller is important since both are entitled to the mantle of equal protection of the law,” Ms. Lee said.
Lee was with the President’s team to China as part of the delegation of the Management Association of the Philippines, where she is vice president, and the Lee Consulting firm, where she is president.
Honda Cars Philippines Inc. which has been doing voluntary recalls since 2005, said that it fully supports the immediate passage of the Lemon Law. Voltaire Gonzales, vehicle sales and corporate communications head, said during its most recent voluntary safety recall announcement just this Monday of 19,143 units of Jazz (model years 2005-2007), City (2006-2008) and CR-V (2005-2006) due to a defective power window master switch, that Honda would abide with the final provisions of the law, and that the Japanese carmaker is confident that Philippine lawmakers would be able to craft and pass guidelines that are fair to all.
“Being a consumer myself, any law that is reasonable, practical and that can improve consumer protection is welcome. We at Honda are confident that we can dutifully abide by it,” Gonzales said.
Fe Perez Agudo, Hyundai Asia Resources Inc. president and chief executive officer, welcomed the passage of the Lemon Law. She stressed, however, that the standards to be set in the law must be fair and equitable to dealers and distributors as well.
Ms. Agudo said that the Lemon Law must clearly provide reasonable and realistic parameters in defining mutual rights and obligations.
“It must also establish a workable process in the exercise of the rights and enforcement of obligations of each party within the context of the Philippine setting, e.g., local road conditions,” Agudo said.
Lemon rights period
Agudo stressed that this includes an acceptable “lemon rights period” with sufficient opportunity to correct any defect under warranty cover; provision of reasonable exclusions from coverage of the law; fair and realistic remedies consistent with the warranty obligations of dealer/distributor; and clear-cut and commonly understandable definition of terms, particularly nature of defects, among others, to avoid confusing and litigious and otherwise whimsical claims; and, in case a vehicle is eventually declared a lemon and replacement or refund is awarded, a provision for depreciation must be considered for the period of vehicle use.
“Further, no additional charges or expenses should be imposed against the dealer, unless fraud or misrepresentation is proven,” Agudo quipped.