SECOND DIVISION

G.R. No. 214122, June 08, 2016

AUTOZENTRUM ALABANG, INC., Petitioner, v. SPOUSES MIAMAR A. BERNARDO AND GENARO F. BERNARDO, JR.,
DEPARTMENT OF TRADE AND INDUSTRY, ASIAN CARMAKERS CORPORATION, AND BAYERISHE MOTOREN WERKE
(BMW) A.G., Respondents.

DECISION

CARPIO, ACTING C.J.:

The Case

This petition for review1 assails the Decision dated 30 June 20142 and Resolution dated 4 September 20143 of the
Court of Appeals (CA) in CA-G.R. SP No. 127748, which affirmed the Decision dated 30 April 20124 of the
Department of Trade and Industry (DTI).

The Facts

On 12 November 2008, respondents Spouses Miamar A. Bernardo and Genaro F. Bernardo, Jr. (Spouses Bernardo)
bought a 2008 BMW 320i sports car, in the amount of P2,990,000, from petitioner Autozentrum Alabang, Inc.
(Autozentrum), a domestic corporation and authorized dealer of BMW vehicles. Autozentrum was authorized to
deliver a brand new car to Spouses Bernardo.5ChanRoblesVirtualawlibrary

On 12 October 2009, Spouses Bernardo brought the car to BMW Autohaus, the service center of respondent Asian
Carmakers Corporation (ACC), because its ABS brake system and steering column malfunctioned. On 26 October
2009, six days after the car's release, Spouses Bernardo returned the car to BMW Autohaus due to the
malfunctioning of the electric warning system and door lock system. Sometime in March 2010, the car was brought
again to BMW Autohaus because its air conditioning unit bogged down. BMW Autohaus repaired the car under its
warranty.

In September 2010, Spouses Bernardo brought the car to BMW Autohaus, under an insurance claim, for the
replacement of its two front wheels due to the damage of its wishbone component. BMW Autohaus performed
the repairs and discovered that one of the rear tires did not have Running Flat Technology (RFT), when all of its
tires should have RFT. Upon being informed, Autozentrum replaced the ordinary tire with an RFT tire.

On 13 January 2011, Spouses Bernardo brought the car to ACC because the car's fuel tank was leaking. ACC
replaced the fuel tank without cost to the Spouses Bernardo. On 17 January and 26 January 2011, Spouses
Bernardo sent letters to Autozentrum, demanding for the replacement of the car or the refund of their payment.

In his letter dated 29 January 2011,6 Autozentrum's Aftersales Manager Ron T. Campilan (Campilan) replied that
the car purchased by Spouses Bernardo was certified pre-owned or used, and that Autozentrum's legal department
was still examining their demand.

On 24 February 2011, Spouses Bernardo filed a complaint for refund or replacement of the car and damages with
the DTI against respondents Autozentrum, ACC, and Bayerishe Motoren Werke (BMW) A.G. for violation of Article
50(b) and (c), in relation to Article 97, of the Consumer Act of the Philippines or Republic Act No. (RA) 7394.

In their Supplemental Complaint dated 23 September 2011, Spouses Bernardo alleged that they brought the car
again to Autozentrum after the electrical system and programming control units malfunctioned on 4 June 2011.
The car was released to them five days later, but was towed to Autozentrum on 8 August 2011, because its engine
emitted smoke inside the car. Autozentrum has custody of the car until now.

The DTI Ruling

In a Decision dated 30 April 2012, DTI Hearing Officer Maria Fatima B. Pacampara (Hearing Officer) ruled that
Autozentrum violated the Consumer Act of the Philippines particularly the provisions on defective products and
deceptive sales. In concluding that the car was defective, the Hearing Officer considered that the major
malfunctions in the car do not usually happen in such a short period of usage, and Autozentrum did not present
proof that the malfunctions were caused by ordinary wear and tear.

The Hearing Officer further held Autozentrum liable for deceptive sales because the car was not brand new at the
time of sale, contrary to what Autozentrum represented to Spouses Bernardo. However, the Hearing Officer
exculpated ACC and BMW, since there was no proof that the defects were due to design and manufacturing, and
they were not privy to the sale of the car.

The dispositive portion of the Decision reads:

WHEREFORE, in view of the foregoing, this Honorable Office finds in favor of the Complainant. The Respondent
Autozentrum, having violated the provisions of the Consumer Act particularly on defective products and deceptive
sales act, is hereby ordered to:

1. To pay an administrative fine of ONE HUNDRED SIXTY THOUSAND PESOS (Php 160,000.00) and the additional
administrative fine of not more than One Thousand Pesos (Php 1,000.00) for each day of continuing violation, at
the DTI-NCR Cashier's Office at the 12th Floor, Trafalgar Plaza, HV Dela Costa St., Salcedo Village, Makati City;

2. To refund, in favor of the Complainant, the purchase price of the subject vehicle [in the] amount of Two Million
Nine Hundred and Ninety Thousand Pesos (Php 2,990,000.00) for the amount of the memory stick [sic] bought
from the Respondent.

SO ORDERED.7
In a Resolution dated 14 September 2012, the DTI Appeals Committee affirmed the findings of the Hearing Officer,
but modified the amount to be reimbursed to Spouses Bernardo taking into account the depreciation of the car, as
follows:
WHEREFORE, premises considered, the instant appeal is hereby dismissed. The decision finding respondent to have
violated the provisions of the Consumer Act is affirmed with modification in paragraph 2 thereof. In view of the
fact that the complainants had made use of the vehicle for two (2) years, the Committee modifies par. 1 of the
dispositive portion of the decision pursuant to the case entitled Sps. Eslao vs. Ford Cars Alabang, Adm. Case No. 07-
43. Said decision was appealed to the Court of Appeals through petition for certiorari (CA-G.R. SP No. 111859) and
Supreme Court through petition for review on certiorari (Ford Cars Alabang vs. Sps. Ike and Mercelita Eslao, et al.
(G.R. No. 194250) wherein the Court resolves to deny the petition for failure to show any reversible error in the
challenged resolution. The decision dated 11 March 2009 in Adm. Case No. 07-43 which was partly modified in the
Resolution dated 1 October 2009 of the DTI-Appeals Committee was then fully implemented. On that basis, the
Committee modifies par. 2 of the dispositive portion of the assailed decision to read as follows:

2. To reimburse the total purchase price of the subject BMW 320i unit less the beneficial use of the vehicle.

Record shows that complainant already used the vehicle for two (2) years before the filing of the complaint. In this
regard, the Committee deems it proper and reasonable to apply COA Circular No. 2003-07 dated 11 December
2003 entitled Revised Estimated Useful Life in Computing Depreciation for Government Property. By analogy, such
circular provides the basis for computing the depreciation value of a vehicle. Under par. 4 of the said Circular, a
residual value equivalent to 10% of the acquisition cost/ appraised value shall be deducted before dividing the
same by the Estimated Useful Life. Annex "A" thereof provides that the Estimated Useful Life (in years) of motor
vehicles is seven (7) years.
Thus, the complainant is entitled to the reimbursement, computed as follows:
Acquisition cost x 10%
Php2,990,000.00 x 10% = Php299,000.00 (Residual Value)

Acquisition cost less the residual value

Php2,990,000.00 - Php299,000.00 = Php2,691,000.00

Php2,691,000.00/7 years (estimated useful life)= Php384,428.57

(depreciated value per year)

Depreciated value x the number of beneficial use

Php384,428.57 x 2 (the no. of years vehicle was used before filing of the complaint)= Php 768,857.14

Acquisition Cost - Depreciation value for 2 years

Php2,990,000.00 - Php 768,857.14 = Php2,221,142.90
(remaining value of the vehicle)
The complainant shall be reimbursed the amount of two million two hundred twenty one thousand one hundred
forty two pesos and ninety centavos (Php 2,221,142.90), however, the subject vehicle shall be returned to the
respondent.

SO ORDERED.8
Hence, Autozentrum filed an appeal with the CA.

The Decision of the CA

In a Decision dated 30 June 2014, the CA ruled in favor of Spouses Bernardo. The CA found that the car was
defective and not brand new. Thus, the CA held that Autozentrum should be liable under Article 1561, in relation
to Article 1567, of the Civil Code, and not under Articles 97 and 98 of RA 7394. The CA ruled that a two-year
depreciation value should not be deducted from the purchase price of the car, since Autozentrum did not submit
proof of depreciation.

The CA also held Autozentrum liable for deceptive sales under Article 50(c) of RA 7394, because it represented an
altered and second-hand vehicle as a brand new one. The dispositive portion of the Decision reads:
WHEREFORE, finding the petition for certiorari bereft of merit, the same is hereby DISMISSED. The assailed
resolution of the DTI is hereby AFFIRMED with MODIFICATION in that as regards the amount of
refund/reimbursement of the purchase price of the subject vehicle, petitioner is hereby ORDERED to pay the full
amount of TWO MILLION NINE HUNDRED NINETY THOUSAND PESOS (Php2,990,000.00).

SO ORDERED.9
In a Resolution dated 4 September 2014, the CA denied the motion for reconsideration filed by Autozentrum.

Hence, this petition.

The Issues

Autozentrum raises the following issues for resolution:

THE HONORABLE ADJUDICATING OFFICER GRAVELY ABUSED HER DISCRETION AND/OR EXCEEDED HER AUTHORITY
IN RULING THAT THE PETITIONER VIOLATED ARTICLE 97 OF THE CONSUMER ACT OF THE PHILIPPINES WHEN THE
LAW AND EVIDENCE CLEARLY SHOW IT DID NOT.
THE HONORABLE ADJUDICATING OFFICER GRAVELY ABUSED HER DISCRETION IN RULING THAT THE PETITIONER
HAD VIOLATED ART. 50 OF THE CONSUMER ACT OF THE PHILIPPINES (R.A. 7394) ON PROHIBITION AGAINST
DECEPTIVE SALES ACTS OR PRACTICES WHEN THE FACTS OF THE CASE POINT THAT IT DID NOT.

THE HONORABLE ADJUDICATING OFFICER GRAVELY ABUSED HER DISCRETION AND/OR EXCEEDED HER AUTHORITY
IN ORDERING SOLELY THE PETITIONER TO REFUND THE ENTIRE PURCHASE PRICE OF THE SUBJECT VEHICLE.

ASSUMING ARGUENDO THAT THE PETITIONER HAS INDEED VIOLATED THE SAID ARTS. 97 AND/OR 50 OF THE
CONSUMER ACT OF THE PHILIPPINES, THE HONORABLE ADJUDICATING OFFICER [GRAVELY] ABUSED HER
DISCRETION AND/OR EXCEEDED HER AUTHORITY IN IMPOSING THE AMOUNT OF THE PENALTIES IMPOSED.

THE OFFICE OF THE DTI SECRETARY THROUGH THE APPEALS COMMITTEE COMMITTED [AN] ERROR IN AFFIRMING
THE DECISION OF THE ADJUDICATING OFFICER.

THE COURT OF APPEALS COMMITTED AN ERROR IN AFFIRMING WITH MODIFICATION THE RESOLUTION/DECISION
OF THE OFFICE OF THE DTI SECRETARY AND IN DENYING PETITIONER'S MOTION FOR RECONSIDERATION.10
The Ruling of the Court

The petition has no merit.

Spouses Bernardo allege that Autozentrum violated Article 50(b) and (c), in relation to Article 97, of RA 7394,
when it sold to them a defective and used car, instead of a brand new one. Autozentrum, however, claims that
Spouses Bernardo failed to prove the elements of deceit or misrepresentation under Article 50, and injury under
Article 97.

The relevant provisions of RA 7394 or the Consumer Act of the Philippines are:
Article 50. Prohibition Against Deceptive Sales Acts or Practices. - A deceptive act or practice by a seller or
supplier in connection with a consumer transaction violates this Act whether it occurs before, during or after the
transaction. An act or practice shall be 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.

Without limiting the scope of the above paragraph, the act or practice of a seller or supplier is deceptive when it
represents that:

a) a consumer product or service has the sponsorship, approval, performance, characteristics, ingredients,
accessories, uses, or benefits it does not have;

b) a consumer product or service is of a particular standard, quality, grade, style, or model when in fact it is not;

c) a consumer product is new, original or unused, when in fact, it is in a deteriorated, altered, reconditioned,
reclaimed or second-hand state;

d) a consumer product or service is available to the consumer for a reason that is different from the fact;

e) a consumer product or service has been supplied in accordance with the previous representation when in fact
it is not;

f) a consumer product or service can be supplied in a quantity greater than the supplier intends;

g) a service, or repair of a consumer product is needed when in fact it is not;

h) a specific price advantage of a consumer product exists when in fact it does not;
i) 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; and

j) the seller or supplier has a sponsorship, approval, or affiliation he does not have.

xxxx

Article 97. Liability for the Defective Products. - Any Filipino or foreign manufacturer, producer, and any
importer, shall be 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.

A product is defective when it does not offer the safety rightfully expected of it, taking relevant circumstances
into consideration, including but not limited to:

a) presentation of product;
b) use and hazards reasonably expected of it;
c) the time it was put into circulation.

A product is not considered defective because another better quality product has been placed in the market.

The manufacturer, builder, producer or importer shall not be held liable when it evidences:

a) that it did not place the product on the market;

b) that although it did place the product on the market such product has no defect;
c) that the consumer or a third party is solely at fault.11 (Emphasis supplied)
RA 7394 specifically provides that an act of a seller is deceptive when it represents to a consumer that a product
is new, original or unused, when in fact, it is deteriorated, altered, reconditioned, reclaimed or second-hand. A
representation is not confined to words or positive assertions; it may consist as well of deeds, acts or artifacts of
a nature calculated to mislead another and thus allow the fraud-feasor to obtain an undue advantage.12 Failure
to reveal a fact which the seller is, in good faith, bound to disclose may generally be classified as a deceptive act
due to its inherent capacity to deceive.13 Suppression of a material fact which a party is bound in good faith to
disclose is equivalent to a false representation.14

A case where the defendant repainted an automobile, worked it over to resemble a new one and represented
that the automobile being sold was new, was found to be "a false representation of an existing fact; and, if it
was material and induced the plaintiff to accept something entirely different from that which he had contracted
for, it clearly was a fraud which, upon its discovery and a tender of the property back to the seller, entitled the
plaintiff to rescind the trade and recover the purchase money."15

In the present case, both the DTI and the CA found that Autozentrum sold a defective car and represented a
second-hand car as brand new to Spouses Bernardo. In finding that the evidence weighs heavily in favor of
Spouses Bernardo, the DTI and the CA gave considerable weight to the following facts: (1) the condition of the
car in just 11 months from the date of purchase; (2) Autozentrum's Aftersales Manager Campilan's letter
declaring that the vehicle was certified pre-owned or used; (3) one of the tires was not RFT; and (4) the Land
Transportation Office (LTO) registration papers stating that Autozentrum was the previous owner of the car. As
public documents, the LTO registration papers are prima facie evidence of the facts stated therein.16

By reason of the special knowledge and expertise of the DTI over matters falling under its jurisdiction, it is in a
better position to pass judgment on the issues; and its findings of fact in that regard, especially when affirmed
by the CA, are generally accorded respect, if not finality, by this Court.17
Moreover, by claiming that its initial intention was for the car to be used by one of its executive officers,
Autozentrum effectively admitted ownership of the car prior to its purchase by Spouses Bernardo. Autozentrum
failed to present evidence that its intention did not occur. On the other hand, Autozentrum's registration of the
car under its name and Campilan's letter bolster the fact that the car was pre-owned and used by Autozentrum.
For failure to reveal its prior registration of the car in its name, and for representing an altered and second-hand
car as brand new to Spouses Bernardo, Autozentrum committed a deceptive sales act, in violation of Section 50
of RA 7394.

However, Autozentrum cannot be liable under Article 97 of RA 7394 because Spouses Bernardo failed to present
evidence that Autozentrum is the manufacturer, producer, or importer of the car and that damages were caused
to them due to defects in design, manufacture, construction, assembly and erection, formulas and handling and
making up, presentation or packing of products, as well as for the insufficient or inadequate information on the
use and hazards thereof.

RA 7394 provides the penalties for deceptive, unfair, and unconscionable sales acts or practices, as follows:
Article 60. Penalties. - a) Any person who shall violate the provisions of Title III, Chapter I, shall upon conviction,
be subject to a fine of not less than Five Hundred Pesos (P500.00) but not more than Ten Thousand Pesos
(P10,000.00) or imprisonment of not less than five (5) months but not more than one (1) year or both, upon the
discretion of the court.

b) In addition to the penalty provided for in paragraph (1), the court may grant an injunction restraining the
conduct constituting the contravention of the provisions of Articles 50 and 51 and/or actual damages and such
other orders as it thinks fit to redress injury to the person caused by such conduct.

xxxx

Article 164. Sanctions. - After investigation, any of the following administrative penalties may be imposed even
if not prayed for in the complaint:

a) the issuance of a cease and desist order, Provided, however, That such order shall specify the acts that
respondent shall cease and desist from and shall require him to submit a report of compliance therewith within
a reasonable time;

b) the acceptance of a voluntary assurance of compliance or discontinuance from the respondent which may
include any or all of the following terms and conditions:

1) an assurance to comply with the provisions of this Act and its implementing rules and regulations;

2) an assurance to refrain from engaging in unlawful acts and practices or unfair or unethical trade practices
subject of the formal investigation;

3) an assurance to comply with the terms and conditions specified in the consumer transaction subject of the
complaint;

4) an assurance to recall, replace, repair, or refund the money value of defective products distributed in
commerce;

5) an assurance to reimburse the [complainant] out of any money or property in connection with the complaint,
including expenses in making or pursuing the complaint, if any, and to file a bond to guarantee compliance
therewith.

c) restitution or rescission of the contract without damages;

d) condemnation and seizure of the consumer product found to be hazardous to health and safety unless the
respondent files a bond to answer for any damage or injury that may arise from the continued use of the
product;

e) the imposition of administrative fines in such amount as deemed reasonable by the Secretary, which shall in
no case be less than Five Hundred Pesos (P500.00) nor more than Three Hundred Thousand Pesos (P300,000.00)
depending on the gravity of the offense, and an additional fine of not more than One Thousand Pesos
(P1,000.00) for each day of continuing violation.18 (Emphasis supplied):
DTI Department Administrative Order No. 007-0619 reiterates the power of the DTI Adjudication Officer to
impose the following penalties upon the respondent, if warranted, and even if these have not been prayed for
by the complainant: "(3) The restitution or rescission of the contract without damages; x x x (5) The imposition
of an administrative fine in such amount as deemed reasonable by the Adjudication Officer, which shall in no
case be less than Five Hundred Pesos (P500.00) nor more than Three Hundred Thousand Pesos (P300,000.00)
depending on the gravity of the offense, and [an] additional administrative fine of not more than One Thousand
Pesos (P1,000.00) for each day of continuing violation x x x."

The DTI is tasked with protecting the consumer against deceptive, unfair, and unconscionable sales acts or
practices.20 Thus, the DTI can impose restitution or rescission of the contract without damages and payment of
administrative fine ranging from P500 to P300,000, plus P1,000 for each day of continuing violation. Rescission
creates the obligation to return the things which were the object of the contract, together with their fruits, and
the price with its interest; consequently, it can be carried out only when he who demands rescission can return
whatever he may be obliged to restore.21 Rescission abrogates the contract from its inception and requires a
mutual restitution of the benefits received.22

Records show that Autozentrum already possessed the car since 8 August 2011. Thus, the DTI Hearing Officer
and the CA correctly applied RA 7394 and DTI Department Administrative Order No. 007-06 when they ordered
Autozentrum to return to Spouses Bernardo the value of the car amounting to P2,990,000 and to pay an
administrative fine of P160,000 and an additional administrative fine of not more than P1,000 for each day of
continuing violation.

Section 1 of Resolution No. 796 of the Monetary Board of the Bangko Sentral ng Pilipinas dated 16 May 2013
provides: "The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed
in judgments, in the absence of an express contract as to such rate of interest, shall be six percent (6%) per
annum." Thus, Autozentrum is ordered to pay the value of the car amounting to P2,990,000, with a legal interest
rate of 6% per annum from the finality of this Decision until the amount is fully paid.

WHEREFORE, we DENY the petition and AFFIRM with MODIFICATION the Decision dated 30 June 2014 and
Resolution dated 4 September 2014 of the Court of Appeals in CA-G.R. SP No. 127748. We ORDER petitioner
Autozentrum Alabang, Inc. to RETURN to respondents Spouses Miamar A. Bernardo and Genaro F. Bernardo, Jr.
the value of the car amounting to P2,990,000, with 6% interest per annum from the finality of this Decision until
the amount is fully paid.

SO ORDERED.

Del Castillo, Mendoza, and Leonen, JJ., concur.

Brion, J., on official leave.

Endnotes:
1Rollo, pp. 11-38. Under Rule 45 of the 1997 Rules of Civil Procedure.

2 Id. at 60-73. Penned by Associate Justice Romeo F. Barza, with Associate Justices Hakim S Abdulwahid and Ramon
A. Cruz concurring.
3 Id. at 74-76.

4 Id. at 39-50. Penned by Hearing Officer Maria Fatima B. Pacampara.

5 Id. at 182.

6 Id. at 185-186.

7 Id. at 49-50.

8 Id. at 57 and 59.

9 Id. at 72-73.

10 Id. at 17-18.

11 The Consumer Act of the Philippines, Articles 50 and 97.

12 Guinhawa v. People of the Philippines, 505 Phil. 383 (2005).

13 Id., citing Testo v. Russ Dunmire Oldsmobile, Inc., 83 A.L.R., 3rd ed., p. 680 (1976); 554 P.2d 349.

14 Id., citing Tyler v. Savage, 143 U.S. 79, 12 [Link]. 340, 36 [Link]. 82.

15 Id., citing Snellgrove v. Dingelhoef, 103 S.E. 418 (1920).

16 Rules of Court, Rule 132, Section 23 states: "Documents consisting of entries in public records made in the
performance of a duty by a public officer are prima facie evidence of the facts therein stated. All other public
documents are evidence, even against a third person, of the fact which gave rise to their execution and of the date
of the latter."

17 Aowa Electronic Philippines, Inc. v. Department of Trade and Industry, 664 Phil. 233 (2011).

18 The Consumer Act of the Philippines, Articles 60 and 164.

19 Dated 14 July 2006.

20 The Consumer Act of the Philippines, Articles 48 and 49.

21 Civil Code of the Philippines, Article 1385.

22 Supercars Management & Development Corporation v. Flores, 487 Phil. 259 (2004).
SECOND DIVISION
[ G.R. No. 189655, April 13, 2011 ]
AOWA ELECTRONIC PHILIPPINES, INC., PETITIONER, VS. DEPARTMENT OF TRADE AND INDUSTRY, NATIONAL
CAPITAL REGION, RESPONDENT.

RESOLUTION
NACHURA, J.:

Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Civil Procedure, seeking the
reversal of the Court of Appeals (CA) Decision[2] dated June 23, 2009, which affirmed the resolution dated August
26, 2008[3] of the Department of Trade and Industry (DTI), Appeals Committee, sustaining the decision[4] dated
April 10, 2008 of the DTI Adjudication Officer (Adjudication Officer).

The facts, as quoted by the CA from the Adjudication Officer's findings, are as follows:

DTI-NCR's records show that numerous administrative complaints have been filed against Aowa Electronic
Philippines, Inc. by different consumers, or a total of at least two hundred and seventy-three (273) from the year
2001 until 2007. The facts narrated in the said complaints consistently contain a common thread, as follows:

A target customer is approached by Aowa's representatives, usually in a mall and informs the former that he/she
has won a gift or is to receive some giveaways. In certain cases, when the target customer expresses interest in the
said "gift" or giveaway, Aowa's representatives then verbally reveal that the same can only be claimed or received
upon purchase of an additional product or products, which are represented to be of high quality. However,
consumer complainants allege that such products are substantially priced.

An initial gift is offered to the target customer, and upon acceptance, the customer is invited to [Aowa's]
store/outlet. It is at that point that the customer is informed that he/she has qualified for a raffle draw or contest,
entitling them to claim an additional "gift." In the same manner, such additional gift can be received only upon the
purchase of additional products, also represented to be of high quality, and sometimes similarly alleged to be
substantially charged.

[In] the course of enticing the target customer to purchase the additional product, they are physically surrounded
by Aowa's representatives, otherwise known to many as "ganging up" o[n] customers.

Although the customer is required to purchase an additional product to claim the offered "gift/s," this is not
disclosed during the initial stages of the sales pitch. The revelation is only done when the target customer is being
surrounded by Aowa's representatives within its showroom/store/outlet. In some cases, when customers state
that they are short of cash, [Aowa's] representatives urge said customers to use their credit card or to withdraw
from an Automated Teller Machine (ATM). There are even instances where [Aowa's] representatives accompany a
customer to his/her residence, where the latter can produce their (sic) means of payment.

In view thereof, DTI-NCR filed a Formal Charge against AOWA for violation of Articles 50 and 52 of the Consumer
Act of the Philippines, praying that a Cease and Desist Order be issued, and [an] administrative fine be imposed,
and other reliefs or remedies be granted as may be just and equitable under the circumstances.[5]

The CA further narrates:

When asked to Answer, AOWA denied having violated the provisions of the Consumer Act. A notice of preliminary
conference was thereafter issued, giving the parties to find (sic) ways and means to expedite the proceedings, but
the scheduled preliminary conference had to be terminated, as the proposal to enter into a plea bargain
agreement did not ensue. As a consequence thereof, both parties were required to submit their respective
position papers.
Meanwhile, a Preventive Measure Order (PMO) was issued by the DTI in order to prohibit AOWA from continuing
with the act complained of until such time that a sale promotion permit is secured or obtained from the DTI.

In their position paper, AOWA vehemently denied committing any violation of the provisions of the Consumer Act
as it does not employ the marketing scheme described in the formal charge. AOWA argued that the mere filing of
the consumer complaint does not prove outright that an offense has been committed by it, meaning that it is not a
conclusive proof that it is violating the law it is charged of. It stressed that all of the consumer complaints against it
have not prospered, as the cases have been amicably settled. In addition, majority of the consumer complaints
which served as basis for the filing of the formal charge are already deemed barred by prescription. As far as it is
concerned therefore, AOWA claims that the complaint[s are] based on mere assumption and not on established
facts.[6]

On April 10, 2008, after considering the arguments of petitioner Aowa Electronic Philippines, Inc. (Aowa) and
respondent DTI-National Capital Region (NCR), the Adjudication Officer found that the complaints against Aowa
continued to increase despite its claims of amicable settlement. He also found that Aowa submitted no proof of
such amicable settlement. Based on the numerous complaints against Aowa, the Adjudication Officer held that the
DTI had sufficiently established prima facie evidence against Aowa for violation of the applicable provisions of
Republic Act (R.A.) No. 7394, or the Consumer Act of the Philippines (the Consumer Act), and its Implementing
Rules and Regulations (IRR). Furthermore, the Adjudication Officer highlighted that Aowa failed to secure any Sales
Promotion Permit from the DTI for Aowa's alleged promotional sales. Thus, he ruled:
WHEREFORE, foregoing premises considered, and by virtue of the power and mandate vested in this Department,
to promote and encourage fair, honest and equitable relations among parties in consumer transactions and
protect the consumer against deceptive, unfair and unconscionable sales act or practices, [Aowa] is hereby
declared liable under the Consumer Act of the Philippines and the Rules and Regulations Implementing the same.
As a consequence thereof, it is hereby ordered, that:

a) [Aowa] must permanently cease and desist from operating its business in all its stores/outlets nationwide;

b) [Aowa's] Certificates of Business Name Registration for all its stores/outlets applying the sales scheme in
question be cancelled;

c) [Aowa's] application for the registration of the same or another business name be withheld by DTI if the nature
thereof is the same as that mentioned in this case;

d) [Aowa] must pay and/or refund to those who filed administrative complaint[s] with any DTI Office, the amount
of money paid in consideration for the purchase of products sold in [Aowa's] stores/outlets as a precondition to
the claim of the gift/reward promised to be given to said complainants[; and]

e) [Aowa] must pay a one time Administrative Fine of Three Hundred Thousand Pesos (P300,000.00), Philippine
currency, either in cash or in the form of Company or Manager's check, at the DTI Cashier's Office, 4th Floor, Trade
and Industry Building, 361 Sen. Gil Puyat Ave., Makati City.

Let a copy of this Decision be furnished to all Heads of DTI Provincial and Area Offices who are hereby directed to
disseminate copies hereof to the Heads of Business Permit Bureau/Division of the different municipalities or cities
within their respective jurisdictions for their appropriate action.

SO ORDERED.[7]

Aggrieved, Aowa sought recourse from the DTI Appeals Committee, ascribing grave abuse of discretion to the
Adjudication Officer.

On August 26, 2008, the DTI Appeals Committee dismissed Aowa's appeal and sustained the Adjudication Officer's
decision. It held that the techniques and schemes employed by Aowa were fraudulent, as they were being used as
a bait to lure customers into buying its products. The DTI Appeals Committee noted that Aowa's act of giving gifts
and prizes to its prospective customers in order to entice the latter to enter Aowa's store and to purchase its
products is a common thread in every complaint lodged against Aowa before the DTI.[8]

Unperturbed, Aowa filed a petition for certiorari under Rule 65 of the Rules of Civil Procedure before the CA. On
June 23, 2009, the CA affirmed the findings and ruling of the DTI Appeals Committee. The CA heavily relied on the
findings of the Adjudication Officer and the DTI Appeals Committee, showing that Aowa committed acts of
misrepresentation against its customers, clearly violative of the Consumer Act. Likewise, the CA affirmed the lower
agencies' findings that Aowa indeed did not secure any Sales Promotion Permit for its promotional sales.[9]

Unyielding, Aowa filed its motion for reconsideration, which the CA, however, denied in its Resolution[10] dated
September 29, 2009.

Hence, this petition based on the following grounds:

[I.] WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT THERE IS
SUFFICIENT BASIS IN THE FILING OF THE FORMAL CHARGE AGAINST HEREIN PETITIONER NOTWITHSTANDING THE
FACT THAT THE SAID FORMAL CHARGE WAS MERELY BASED ON CONSUMER COMPLAINTS WHICH HAVE ALL BEEN
AMICABLY SETTLED AND DISMISSED. MOREOVER, THE HEREIN RESPONDENT DOES NOT HAVE ANY PERSONAL
KNOWLEDGE OF THE CIRCUMSTANCES SURROUNDING ALL THE CONSUMER COMPLAINTS FILED AGAINST THE
PETITIONER[;] [II.]

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT AFFIRMED THE HARSH AND
EXCESSIVE DECISION OF THE DEPARTMENT OF TRADE AND INDUSTRY, APPEALS COMMITTEE ORDERING THE
HEREIN PETITIONER TO PERMANENTLY CEASE AND DESIST FROM OPERATING ITS BUSINESS AND IN ADDITION TO
PAY THE MAXIMUM FINE PROVIDED UNDER THE LAW NOTWITHSTANDING THE FACT THAT THE FORMAL CHARGE
IS NOT SUPPORTED BY ANY CONCRETE, SUFFICIENT AND CONVINCING EVIDENCE[; AND]

[III.] WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN ITS RULING THAT THE ASSAILED
RESOLUTION'S ORDER MAY BE ENFORCED NATIONWIDE DESPITE THE FACT THAT THE COMPLAINT PERTAINS TO
CASES IN THE NATIONAL CAPITAL REGION ONLY[.][11]

Aowa claims that the complaints filed against it merely pertain to cases in the NCR, hence, there was no basis for
the DTI to presume that the alleged offenses committed by petitioner are likewise practiced in other places in the
country; that DTI never denied Aowa's averment that the cases filed against it by customers were already and
actually settled; that the mere filing of numerous complaints does not prove outright that an offense has been
committed; and that the complaints were based on mere assumptions and not on established facts. Moreover,
Aowa's act of amicably settling the cases with the consumer-complainants manifests Aowa's good faith and fair
dealing with its patrons, not commensurate with the penalty of closure and the maximum fine imposed by the DTI.
Finally, Aowa denies that it committed fraud and/or deceit in violation of the Consumer Act. Good faith must
always be presumed. Aowa postulates that like other companies, its sales personnel are employed to convince
potential customers to purchase the products they are selling, inclusive of enthusiasm in sales talk and
overzealousness which cannot and should not be considered as deceit. Customers in this case were never deprived
of their prerogative to refuse the offer of the sales agents of Aowa, as the terms and conditions of the sale were
fully explained to all of its customers.[12]

On the other hand, the DTI, through the Office of the Solicitor General (OSG), claims that there is sufficient basis
for the filing of the formal charge against petitioner; that through Assistant Secretary Ma. Theresa L. Pelayo, acting
as Regional Caretaker, it filed the formal charge against Aowa based on the numerous complaints filed against the
latter and pursuant to Article 159[13] of the Consumer Act; that said complaints constituted prima facie violation
of the Consumer Act; that, as such, Aowa has the burden to overcome the presumption by proof to the contrary;
and that Aowa, however, failed to discharge the said burden. The OSG argues that, contrary to Aowa's assertion,
the amicable settlement allegedly entered by Aowa and its consumer-complainants is not a ground for the
dismissal of the formal charge because Aowa, despite respondent's issuance of a Preventive Measure Order[14]
(PMO) on July 31, 2009, continues to enter and engage in the same acts and/or transactions complained of.
Consonant with the findings of the lower agencies and the CA, the OSG asseverates that Aowa, after it was
afforded its right to due process, was correctly found liable for violation of the Consumer Act through
misrepresentation, and for its failure to secure any Sales Promotion Permit from the DTI. Moreover, the directive
of the Adjudication Officer of closure and imposition of the maximum fine of P300,000.00 is in accordance with law
and its IRR.[15]

Correlatively, Aowa assailed the validity of the PMO with the Regional Trial Court (RTC) of Makati City, Branch 143,
docketed as Civil Case No. 09-723. The RTC, however, dismissed the case for lack of jurisdiction. Unyielding, in a
Petition for Prohibition, Aowa went to the CA which, in its Resolution[16] dated October 27, 2009, dismissed
Aowa's case for its failure to file the petition within the prescribed period. The said CA Resolution became final and
executory on January 28, 2010.[17]

In a Manifestation,[18] the counsel of Aowa intimated that Aowa no longer intends to file a reply to the OSG's
Comment, on the ground that the discussions made therein had already been addressed in the instant Petition.
Counsel, however, also intimated that Aowa left its known office address without informing him of the location of
its new office.

The sole issue in this case is whether or not the CA committed any reversible error in affirming the findings and
ruling of the Adjudication Officer and the DTI Appeals Committee.

The Petition is bereft of merit.

Contrary to Aowa's postulations, the DTI has the authority and the mandate to act upon the complaints filed
against Aowa. Article 2 of the Consumer Act clearly sets forth the policy of the State on consumer protection, viz.:

ART 2. Declaration of Basic Policy. It is the policy of the State to protect the interests of the consumer, promote his
general welfare and to establish standards of conduct for business and industry. Towards this end, the State shall
implement measures to achieve the following objectives:
a) protection against hazards to health and safety;
b) protection against deceptive, unfair and unconscionable sales acts and practices;
c) provision of information and education to facilitate sound choice and the proper exercise of rights by the
consumer;
d) provision of adequate rights and means of redress; and
e) involvement of consumer representatives in the formulation of social and economic policies.
This policy is reiterated in Article 48 of the Consumer Act, which provides that "the State shall promote and
encourage fair, honest and equitable relations among parties in consumer transactions and protect the consumer
against deceptive, unfair and unconscionable sales acts or practices." Verily, as espoused by the OSG, the DTI
validly invoked Article 159 of the Consumer Act in order to effectuate this policy of the State by filing a formal
charge against Aowa. 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.[19]

The law is clear. Articles 50 and 52 of the Consumer Act provide:

ART. 50. Prohibition Against Deceptive Sales Acts or Practices. A deceptive act or practice by a seller or supplier in
connection with a consumer transaction violates this Act whether it occurs before, during or after the transaction.
An act or practice shall be deemed deceptive whenever the producer, manufacturer, supplier or seller, through
concealment, false representation [or] fraudulent manipulation, induces a consumer to enter into a sales or lease
transaction of any consumer product or service. Without limiting the scope of the above paragraph, the act or
practice of a seller or supplier is deceptive when it represents that:
a) a consumer product or service has the sponsorship, approval, performance, characteristics, ingredients,
accessories, uses, or benefits it does not have;
b) a consumer product or service is of a particular standard, quality, grade, style, or model when in fact it is not;
c) a consumer product is new, original or unused, when in fact, it is in a deteriorated, altered, reconditioned,
reclaimed or second-hand state;
d) a consumer product or service is available to the consumer for a reason that is different from the fact;
e) a consumer product or service has been supplied in accordance with the previous representation when in fact it
is not;
f) a consumer product or service can be supplied in a quantity greater than the supplier intends;
g) a service, or repair of a consumer product is needed when in fact it is not;
h) a specific price advantage of a consumer product exists when in fact it does not;
i) 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; and
j) the seller or supplier has a sponsorship, approval, or affiliation he does not have.

xxxx
ART. 52. Unfair or Unconscionable Sales Act or Practice. An unfair or unconscionable sales act or practice by a seller
or supplier in connection with a consumer transaction violates this Chapter whether it occurs before, during or
after the consumer transaction. An act or practice shall be deemed unfair or unconscionable 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. In determining whether an act or
practice is unfair and unconscionable, the following circumstances shall be considered:
a) 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;

b) 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;

c) that when the consumer transaction was entered into, the consumer was unable to receive a substantial
benefit from the subject of the transaction;

d) that when the consumer transaction was entered into, the seller or supplier was aware that there was no
reasonable probability or payment of the obligation in full by the consumer; and

e) 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.

It cannot be gainsaid that the DTI acted on the basis of about 273 consumer complaints against Aowa, averring a
common and viral scheme in carrying out its business to the prejudice of consumers. Complaints filed by
consumers residing not only within the NCR but also in the provinces[20] -continued to be filed even after the
formal charge and the issuance of the PMO. In this regard, we quote with affirmation and accord respect to the
factual findings of the CA, to wit:
[Aowa], in employing the sales scheme described by customers in their complaints in order to entice customers to
purchase [its] products clearly violated Article 52 of the Consumer Act of the Philippines. As found by public
respondent DTI whose findings We heretofore adopt:
"It is undisputed that the techniques/scheme employed by [Aowa] were fraudulently (sic) considering that the
same were being used as a bait to lure customers into buying it products. [Aowa's] customary act of giving gifts and
the so called prizes to its prospective customers in order to entice them to enter the store outlet and later
convincing (sic) them to purchase the products [it is] selling are (sic) but common trends (sic) that occurred in
every complaint lodged against [Aowa] before the DTI-NCR and regional offices. In such manner, it is evident that
the said scheme is actually the means by which [Aowa] operates its business. Simply, it is intrinsically connected to
the business itself of and had [Aowa] not employed those techniques, customers would not have transacted with
it."

In doing so, [Aowa], as seller, through its representatives stationed usually in malls, entice 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 [Aowa to] be of high
quality. This is how [Aowa] operates its business, and not simply as a means of promotional sale. The act sought to
be avoided and punished under the Consumer Act has clearly been committed by Aowa.[21]

By reason of the special knowledge and expertise of the DTI over matters falling under its jurisdiction, it is in a
better position to pass judgment on the issues, and its findings of fact in that regard, especially when affirmed by
the CA, are generally accorded respect, if not finality, by this Court.[22] Furthermore, Aowa failed to refute DTI's
finding that it did not secure any permit for its alleged promotional sales. In sum, Aowa failed to show any
reversible error on the part of the CA in affirming the ruling of the DTI as to warrant the modification much less the
reversal of its assailed decision.

A final note.

In these trying times when fly-by-night establishments and syndicates proliferate all over the country, lurking and
waiting to prey on innocent consumers, and ganging up on them like a pack of wolves with their sugar-coated sales
talk and false representations disguised as "overzealous marketing strategies," it is the mandated duty of the
Government, through its various agencies like the DTI, to be wary and ready to protect each and every consumer.
To allow or even tolerate the marketing schemes such as these, under the pretext of promotional sales in
contravention of the law and its existing rules and regulations, would result in consumers being robbed in broad
daylight of their hard earned money. This Court shall not countenance these pernicious acts at the expense of
consumers.

WHEREFORE, the Petition is DENIED and the Court of Appeals Decision dated June 23, 2009 is AFFIRMED. Costs
against petitioner.

SO ORDERED.

Carpio (Chairperson), Peralta, Abad, and Mendoza, JJ., concur.

[1] Rollo, pp. 11-32.

[2] Penned by Associate Justice Jose L. Sabio, Jr., with Associate Justices Vicente S.E. Veloso and Ricardo R. Rosario,
concurring; id. at 36-52.

[3] Id. at 54-58.

[4] Id. at 59-66.

[5] Supra note 2, at 37-39.

[6] Id. at 39-40.

[7] Supra note 4, at 65-66.

[8] Supra note 3.

[9] Supra note 2.

[10] Rollo, pp. 68-69.

[11] Supra note 1, at 20-21.

[12] Id.

[13] Article 159 of the Consumer Act provides, to wit:

ART. 159. Consumer Complaints. The concerned department may commence an investigation upon petition or
upon letter-complaint from any consumer: Provided, That, upon a finding by the department of a prima facie
violation of any provisions of this Act or any rule or regulation promulgated under its authority, it may motu
proprio or upon verified complaint commence formal administrative action against any person who appears
responsible therefor. The department shall establish procedures for systematically logging in, investigating and
responding to consumer complaints into the development of consumer policies, rules and regulations, assuring as
far as practicable simple and easy access on the part of the consumer to seek redress for his grievances.

[14] Entitled "Department of Trade and Industry-National Capital Region, Hon. Vice-President Manuel 'Noli' de
Castro and Jesse Hermogenes T. Andres v. Aowa Electronics Philippines, Inc. Home Depot Macapagal Avenue,
Pasay City," particularly docketed as Adm. Case No. 09-186; rollo, pp. 152-153.

[15] Id. at 132-149.

[16] Id. at 176-177.

[17] Id. at 178.

[18] Id. at 193-195.

[19] Islamic Da'wah Council of the Phils., Inc. v. Office of the Executive Secretary, 453 Phil. 440, 451-452 (2003).

[20] Rollo, pp. 167-175.

[21] Supra note 2, at 45-46.

[22] Metal Forming Corp. v. Office of the President, 317 Phil. 853, 861 (1995).