RA.

7394 Consumer Act of the Philippines

Deceptive Business Practice

It is provided for in Article 50 of RA 7394 the prohibition against deceptive sales acts and practices. Deceptive act
or practice was defined as 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. It occurs before, during and after the transaction. 1 In the case of Autozentrum
Alabang vs Sps Bernardo, the supreme court defined representation in the context of RA 7394 in this wise 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. 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. Suppression of a material fact which a party is bound in good faith to
disclose is equivalent to a false representation. 2 Therefore, in order that a sales act or practice may be deceptive
the representation must give rise to injury to the buyer and the seller is in the position to deceive its customers.

The following are the specific acts and practices provided for in Article 50, 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. 3 The list provided for in this article is not exclusive.

The Department of Health with respect to food, drugs, cosmetics, devices and substances; the Department of
Agriculture with respect to products related to agriculture, and; the Department of Trade and Industry with
respect to other consumer products not specified above, 4 shall after due notice and hearing promulgate
regulations declaring as deceptive any sales act, practice or technique which is a misrepresentation of facts other
than these enumerated in Article 50. 5

It is also prohibited under RA 7394 the practice of unfair and unconscionable sales act or practice. Under article
52, An unfair or unconscionable sales act or practice by a seller or supplier in connection with a consumer
transaction violates the act 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. 6 The act provided list of circumstances to aid the departments and
the courts in determining unconscionable and unfair practice, these are as follows: 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.7

1
Article 50, Consumer Act of the Philippines, Republic Act No. 7394, [April 13, 1992])
2
Autozentrum Alabang, Inc. v. Spouses Bernardo, G.R. No. 214122, [June 8, 2016]
3
Article 50, Consumer Act of the Philippines, Republic Act No. 7394, [April 13, 1992])
4
Article 6, Consumer Act of the Philippines, Republic Act No. 7394, [April 13, 1992])
5
Article 51, Consumer Act of the Philippines, Republic Act No. 7394, [April 13, 1992])
6
Article 52, Consumer Act of the Philippines, Republic Act No. 7394, [April 13, 1992])
7
Article 52, Consumer Act of the Philippines, Republic Act No. 7394, [April 13, 1992])
Article 53 prohibits chain distribution plans or pyramid sales schemes. It was illustrated in the case of People vs
Balasa. In the classic pyramid scheme 10 people say, make an investment and each in turn gets 10 additional
people to invest, who in their turn must each get 10, and so on. The money for the first 10 "investors" comes
from the 10 they enroll, and the money for the second group of 10 comes from the 10 investors that each of
them enrolls, and so on. This type of scheme involves a geometric increase in the number of "investors." The
interesting thing about a geometric progression like this is that starting with only 10 investors, by the 10th round
of such a scheme the number of participants would have to be twice as large as the total population of the earth.
Diagrammatically, such a scheme looks like a pyramid — hence its name. 8

Home solicitation sales are governed by article 554 to 58. It is provided for that no business entity shall conduct
any home solicitation sale of any consumer product or service without first obtaining a permit from the
Department. Such permit may be denied suspended or revoked upon cause as provided in the rules and
regulations promulgated by the Department, after due notice and hearing. 9 The act also provided specified time
to conduct home solicitation sales, home solicitation sales may be conducted only between the hours of nine
o'clock in the morning and seven o'clock in the evening of each working day: Provided, That solicitation sales
may be made at a time other than the prescribed hours where the person solicited has previously agreed to the
same.10 Included in the act is description of those who are allowed to conduct such, Home solicitation sales shall
only be conducted by a person who has the proper identification and authority from his principal to make such
solicitations.11 Requirement of issuance of receipts for home solicitations sales are provided in article 57 as
follows, Sales generated from home solicitation sales shall be properly receipted as per existing laws, rules and
regulations on sale transactions.12 Just like in deceptive sales acts and practices, home solicitation sales are
prohibited on the following representations: (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.13

In article 59 the act defined Referral Sales. Referral selling plans shall not be used in the sale of consumer
products unless 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 sales that said buyers has helped the seller enter
into.14

8
People v. Balasa, G.R. Nos. 106357 & 108601-02, [September 3, 1998], 356 PHIL 362-399
9
Article 54, Consumer Act of the Philippines, Republic Act No. 7394, [April 13, 1992])
10
Article 55, Consumer Act of the Philippines, Republic Act No. 7394, [April 13, 1992])
11
Article 56, Consumer Act of the Philippines, Republic Act No. 7394, [April 13, 1992])
12
Article 57, Consumer Act of the Philippines, Republic Act No. 7394, [April 13, 1992])
13
Article 58, Consumer Act of the Philippines, Republic Act No. 7394, [April 13, 1992])
14
Article 59, Consumer Act of the Philippines, Republic Act No. 7394, [April 13, 1992])