33. THE GOODYEAR TIRE AND RUBBER CO.
OF THE PHILIPPINES, products manufactured, processed or produced by him if his capital does not
LTD., Petitioner-Appellant, v. THE HONORABLE TEOFILO REYES, SR., in
1. MERCANTILE LAW; RETAIL TRADE LAW; MEANING OF TERM "RETAIL
BUSINESS" ; PRESIDENTIAL DECREE NO. 714. — Presidential Decree No. 714
(1975) amended the Retail Trade Nationalization Law (RA No. 1180) which
took effect without presidential approval. As originally worded, the term "retail
business" covers "any act," or calling of habitually selling direct to the general
public merchandise, commodities or goods for consumption, but shall not
include: (a) a manufacturer, processor, laborer or worker selling to the general
public the products manufactured, processed or produced by him if his capital
does not exceed five thousand pesos, or (b) a farmer or agriculturist selling the
production of his farm." (Sec. 4) Under the aforesaid Presidential Decree,
which took effect on May 28, 1975, two more paragraphs were included. They
are:" (c) a manufacturer or processor selling to the industrial and commercial
users or consumers, who use the products bought by them to reader service to
the general public and/or to produce or manufacture goods which are in turn
sold to them; (d) a hotel-owner or keeper operating a restaurant irrespective
of the amount of capital, provided that the restaurant is necessarily included
in, or incidental to, the hotel business."cralaw virtua1aw
2. ID.; ID.; PETITIONER NOT ENGAGED IN RETAIL BUSINESS; REITERATION
OF RULING IN THE GOODRICH CASE. — As the facts in Goodrich (B.F.
Goodrich Phils. Inc. v. Reyes, Sr., L-30067, April 10,1983) are not dissimilar
both as to the nature of the business and the customers, a similar conclusion is
indicated. This Court in that decision categorically stated: "It is clear from the
above that proprietary planters and persons engaged in the exploration of
natural resources are included within the aforesaid amendment. The lower
court decision, however, is in accordance with law insofar as employees and
officers of petitioner are concerned. As thus modified, the decision calls for
affirmance."
DECISION
FERNANDO, J.:
In this appeal by both petitioners Goodyear Tire and Rubber Co. of the
Philippines and intervenor Firestone Tire and Rubber Co. of the Philippines, 1
the lower court holding that as to certain customers, "proprietory planters,
persons engaged in the exploitation of natural resources," and "employees and
officers of the petitioner," they are engaged in retail business, the legal
question raised was set at rest by Presidential Decree No. 714 2 amending the
Retail Trade Nationalization Law which took effect without presidential
approval. 3 As originally worded, the term "retail business" covers "any act,
occupation or calling of habitually selling direct to the general public
merchandise, commodities or goods for consumption, but shall not include: (a)
a manufacturer, processor, laborer or worker selling to the general public the
exceed five thousand pesos, or (b) a farmer or agriculturist selling the product
of his farm." 4 Under the aforesaid Presidential Decree, which took effect on
May 28, 1975, two more paragraphs were included. They are:" (c) a
manufacturer or processor selling to the industrial and commercial users or
consumers who use the products bought by them to render service to the
general public and/or to produce or manufacture goods which are in turn sold
to them; (d) a hotel-owner or keeper operating a restaurant irrespective of the
amount of capital, provided that the restaurant is necessarily included in, or
incidental to, the hotel business." 5
Petitioner Goodyear Tire and Rubber Company of the Philippines as well as
intervenor Firestone Tire and Rubber Company of the Philippines, as noted in
the decision now on appeal, sold their rubber products to certain types or class
of customers as follows:" (a) The Government of the Republic of the Philippines
and all its instrumentalities and/or agencies, who use the Rubber Products to
render essential services to the country and to the general public. (b) Public
utilities, such as bus fleets, taxi fleets, jeepney fleets, freight lines, etc., and
power and communications companies, who use Rubber Products to render
library essential services to third parties and the general public for compensation. (c)
Agricultural enterprises, proprietary planters, agricultural processing plants,
and agricultural cooperatives, who use the Rubber Products to perform
essential services to third parties and to the general public for valuable
consideration and profit. (d) Logging, mining, and other entities and persons
engaged in the exploitation of natural resources. (e) Automotive assembly
plants, who buy the Rubber Products in bulk for use in the assembly of
automotive equipment, and who resell the same to third parties and to the
general public without alteration or change at a profit as the assembled
automotive equipment and vehicles are sold. (f) Industrial and Commercial
enterprises, engaged in manufacturing and sales of prime and essential
commodities to third parties and the general public for a profit, who buy the
Rubber Products for use in their manufacturing and sales operations. (g)
Employees and officers of the petitioner-intervenor." 6
To repeat as to the above-named customers, the court a quo held that
petitioner and intervenor were not exempt from the provisions of Republic Act
No. 1180, although ruling in their favor insofar as the other customers were
concerned, thus making permanent the preliminary injunction issued.
Respondent Acting Secretary of Commerce and Industry likewise appealed. chanrobles.com : virtual law library
As the facts in Goodrich are not dissimilar both as to the nature of the business
and the customers, a similar conclusion is indicated. This Court in that decision
categorically stated: "It is clear from the above that proprietary planters and
persons engaged in the exploration of natural resources are included within the
aforesaid amendment. The lower court decision, however, is in accordance with
law insofar as employees and officers of petitioner are concerned. As thus
modified, the decision calls for affirmance." 7 We do so again. chanrobles.com.ph : virtual law library
WHEREFORE, the lower court decision is affirmed declaring that petitioner and
intervenor are not engaged in retail business within the purview of Section 4 of
Republic Act No. 1180 and Presidential Decree No. 714, except as to its sales
to its employees and officers. The injunction issued is likewise made
permanent but subject to the above qualification. No costs.
REPUBLIC ACT NO. 8762
AN ACT LIBERALIZING THE RETAIL TRADE BUSINESS, REPEALING
FOR THE PURPOSE REALING FOR THE PURPOSE REPUBLIC ACT
NO. 1180, AS AMENDED, AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the
Philippines of Representatives of the Philippines in Congress assembled:
Section 1. Title – This Act shall be known as the "Retail Trade
Liberalization Act of 2000."
Section 2. Declaration of Policy. – It is the policy of the State to promote
consumer welfare in attracting promoting and welcoming productive
investment that will bring down price for the Filipino consumer, create
more jobs, promote tourism, assist small manufacturers, stimulate
economic growth and enable Philippine goods and services to become
globally competitive through the liberalization of the retail trade sector.
Pursuant to this policy, the Philippine retail industry is hereby liberalized
to encourage Filipino and competitive retail trade sector in the interest of
empower the Filipino consumer through lower prices, higher quality
goods, better services and wider choices.
Section 3. Definition. - As used in this Act.
(1) "Retail trade" shall mean any act, occupation or calling of
habitually selling direct to the general public merchandise,
commodities or good for consumption, but the restriction of this
law shall not apply to the following:
(a) Sales by manufacturer, processor, laborer, or worker,
to the general public the products manufactured,
processed or products by him if his capital dose not
exceed One hundred thousand pesos(100,000.00);
(b) Sales by a farmer or agriculturist selling the products
of his farm;
(c) Sales in restaurant operations by a hotel owner or inn-
keeper irrespective of the amount capital: provided, that
the restaurant is incidental to the hotel business; and
(d) Sales which are limited only to products manufactured,
processed or assembled by a manufactured, processed
or assembled by a manufacturer though a single outlet,
irrespective of capitalization.
(2) "High-end or luxury goods" shall refer to goods which are not
necessary for life maintenance and whose demand is generated
in large part by the higher income groups. Luxury goods shall
include, but are not limited to products such as; jewelry, branded
or designer clothing and footwear, wearing apparel, leisure and
sporting goods, electronics and other personal effects.
Section 4. Treatment of Natural Born Citizen Who Has Lost His
Philippine Citizenship. - A natural-born citizen of the Philippines who
resides in the Philippines shall be granted the same rights as Filipino
citizens for purposes of this Act.
Section 5. Foreign Equity Participation. - Foreign-owned partnerships,
associations and corporation formed and organized under the laws of the
Philippines may, upon registration with the Securities and Exchange
Commission (SEC) and the Department of Trade and Industry (DTI), or in
case of foreign owned single proprietorships, with the DTI, Engage or
invest in the retail trade business, subject to the following categories.
Category A – Enterprises with paid-up capital of the
equivalent in Philippine Peso of the than Two million five
hundred thousand US dollars (US$2,500,000.00) shall be
reserved exclusively for Filipino citizens and corporations
wholly owned by Filipino citizens.
Category B – Enterprises with a minimum paid-up capital
of the equivalent in Philippine Pesos of two million five
hundred thousand US dollar (US$2,500,000.00) but less
than Seven million five hundred thousand US dollars
(US$7,500,000.00) may be wholly owned by foreigners
except for the first two (2) years after the effectivity of this
 Act wherein foreign participation shall be limited to not
more than sixty percent (60%) of total equity.
Category C – Enterprises with a paid-up capital of the
equivalent in Philippine Pesos of Seven million five
hundred thousand US dollars (US$7,500,000.00), or more
may be wholly owned by foreigners: Provided, however,
That in no case shall the investments for establishing a
store in vestments for establishing a store in Categories B
and C be less than the equivalent in Philippine pesos of
Eight hundred thirty thousand US dollars
(US$830,000.00).
Category D – Enterprises specializing in high-end or
luxury products with a paid-up capital of the equivalent in
Philippine Pesos of Two hundred fifty thousand US dollars
(US$250,000.00) per store may be wholly owned by
foreigners.
The foreign investor shall be required to maintain in the Philippines the
full amount of the prescribed minimum capital unless the foreign investor
has notified the SEC and the DTI of its intention to repatriate its capital
and cease operations in the Philippines. The actual use in Philippine
operations of the inwardly remitted minimum capital requirement shall be
monitored by the SEC.
Failure to maintain the full amount of the prescribed minimum capital prior
to notification of the SEC and the DTI, shall subject the foreign investor to
penalties or restrictions on any future trading activities/business in the
Philippines.
Foreign retail stores shall secure a certification from the Bangko Sentral
ng Pilipinas (BSP) and the DTI, which will verify or confirm inward
remittance of the minimum required capital investments.
Section 6. Foreign Investors Acquiring Shares of Stock of Local
Retailers. - Foreign investors acquiring shares from existing retail stores
whether or not publicly listed whose net worth is in the excess of the peso
equivalent of Two million five hundred thousand US dollars
(US$2,500,000.00) may purchase only up to a maximum of sixty percent
(60%) of the equity thereof within the first two (2) years from the
effectivity of this Act and thereafter, they may acquire the remaining
percentage consistent with the allowable foreign participation as herein
provided.
Section 7. Public Offering of Shares of Stock. – All retail trade
enterprises under Categories B and C in which foreign ownership
exceeds eighty percent (80%) of equity shall offer a minimum of thirty
percent (30%) of their equity to the public through any stock exchange in
the Philippine within eight (8) years from their start of operations.
Section 8. Qualification of Foreign Retailers. - No foreign retailer shall be
allowed to engage in retail trade in the Philippine unless all the following
qualifications are met:
(a) A minimum of Two hundred million US dollar
(US$200,000,000.00) net worth in its parent corporation for
Categories B and C, and Fifty million US dollar
(US$50,000,000.00) net worth in its parent corporation for
category D;
(b) (5) retailing branches or franchises in operation anywhere
around the word unless such retailer has at least one (1) store
capitalized at a minimum of Twenty-five million US dollars
(US$25,000,000.00);
(c) Five (5)-year track record in retailing; and
(d) Only nationals from, or juridical entities formed or incorporated
in Countries which allow the entry of Filipino retailers shall be
allowed to engage in retail trade in the Philippines.
The DTI is hereby authorized to pre-qualify all foreign retailers, subject to
the provisions of this Act, before they are allowed to conduct business in
the Philippine.
The DTI shall keep a record of Qualified foreign retailers who may, upon
compliance with law, establish retail stores in the Philippine. It shall
ensure that parent retail trading company of the foreign investor complies
with the qualifications on capitalization and track record prescribed in this
section
The Inter- Agency Committee on Tariff and Related Matters Authority
(NEDA) Board shall formulate and regularly update a list of foreign
retailers of high-end or luxury goods and render an annual report on the executive orders, rules and regulations or parts thereof inconsistent with
same to Congress. this Act are repealed or modified accordingly.

Section 9. Promotion of Locally Manufactured Products. - For ten (10) Section 14. Separability Clause. – If any provisions of this Act shall be
year after the effectivity of this Act, at least thirty percent (30%) of the held unconstitutional, the other provisions not otherwise affected thereby
aggregate cost of the stock inventory of foreign retailers falling under shall remain in force and effect.
Categories B and C and ten percent (10%) for category D shall be made
in the Philippines. Section 15. Effectivity. – This act shall take effect fifteen (150 days after
its approval and publication in at least two (2) newspapers of general
Section 10. Prohibited Activities of Qualified Foreign Retailers. circulation in the Philippines.
– Qualified foreign retailers shall not be allowed to engage in certain
retailing activities outside their accredited stores through the use of Approved: March 07, 2000
mobile or rolling stores or carts, the use of sales representatives, door-to-
door selling, restaurants and sari-sari stores and such other similar (SGD.) JOSEPH E. ESTRADA
retailing activities: Provided, That a detailed list of prohibited activities President of the Philippines
shall hereafter be formulated by the DTI

Section 11. Implementing Agency: Rule and Regulations. – The

monitoring and regulation of foreign sole proprietorships, partnerships,
associations or corporations allowed to engage in retail trade shall be the
responsibility of the DTI. This shall include resolution of conflicts.

The DTI, in coordination with the SEC, the NEDA and the BSP, shall
formulate and issue the implementing rules and regulation necessary to
implement this Act within ninety (90) days after its approval.

Section 12. Penalty Clause. - Any person who shall be Found guilty of
Violation of any provision of this Act shall be punished by imprisonment of
not less that six (2) years and one (1) day but not more than eight (8)
years, and a fine of not less than One million pesos

(P1,000,000.00) but not more that Twenty million pesos (P20,000,000.00)

In the case of associations, partnerships or corporations, the penalty shall
be imposed upon its partners, president, directors, manager and other
officers responsible for the violation. If the offender is not a citizen of the
Philippines he shall be deported immediately after service of sentence. If
the Filipino of fender is a public officer or employee, he shall, in addition
to the penalty prescribed herein, suffer dismissal and permanent
disqualification from public office

Section 13. Repealing Clause. – Republic Act No. 1180, as amended, is

hereby repealed. Republic Act No. 3018, as amended, and all other laws,