LTFRB SHOULD HAVE A REGULATORY POWER OVER UBER AND GRAB

1. UBER / GRAB are TNCs and Uber/Grab partners and/or drivers are
TNVS
2. Uber / grab considered public utility
3. For rate-fixing — The Court held that Advocacy of liberalized franchising and
regulatory process is tantamount to an abdication by the government of its
inherent right to exercise police power, that is, the right of government to regulate
public utilities for protection of the public and the utilities themselves. (KMU case)
4. LTFRRB chairman stated that the government will always push for
anything that modernizes transportation systems,” but added that
government regulation must happen when public services are
concerned.
5. Exercise of police power

Background
In Philippine jurisdiction, the Department of Transportation (DOTr), formerly
Department of Transportation and Communication (DOTC), made a new classification of
transport service system known as Transportation Network Vehicle Service (TNVS) as per
the Department Order No. 2015-011. This refers to the Uber/Grab
“partners”/drivers/vehicle. Other classifications are Bus Rapid Transit, Airport Bus and
Taxis— as a response to the increasing demand for mobility brought by the rapid growth
of urbanization in cities and municipalities and address the large demand for transport
services in expeditious and responsive ways as a way of modernizing and improving
transport services currently being offered to the Filipino commuting public. This
classification will allow app-based services offered by Transportation Network
Companies (TNC) to exist within the government’s regulatory framework.
Also under the DO, Transport Network Company (TNC) was defined as an
“organization whether a corporation, partnership or sole proprietor, that
provides pre-arranged transportation services for compensation using
internet-based technology application or digital platform technology to
connect passengers with drivers using their personal vehicles.”
The DO set the standard classifications for public transport conveyance to be used as basis
for the issuance of Certificates of Public Convenience for public utility vehicles.
The two most known TNC in the country are Uber and Grab are considered TNCs. TNC
provides the platform for the transportation service to be pre-arranged, the
transportation service itself is rendered by the TNVS.
E.O 202 OF 1987 CREATING THE LAND TRANSPORTATION FRANCHISING
AND REGULATORY BOARD
Sec. 5. Powers and Functions of the Land Transportation Franchising and
Regulatory Board. The Board shall have the following powers and functions:

a. To prescribe and regulate routes of service, economically viable capacities

and zones or areas of operation of public land transportation services provided by
motorized vehicles in accordance with the public land transportation development plans
and programs approved by the Department of Transportation and Communications;

b. To issue, amend, revise, suspend or cancel Certificates of Public

Convenience or permits authorizing the operation of public land transportation
services provided by motorized vehicles, and to prescribe the appropriate terms and
conditions therefor;

c. To determine, prescribe and approve and periodically review and

adjust, reasonable fares, rates and other related charges, relative to the operation of
public land transportation services provided by motorized vehicles;

d. To issue preliminary or permanent injunction, whether prohibitory or mandatory,

in all cases in which it has jurisdiction, and in which cases the pertinent provisions of the
Rules of Court shall apply;

e. To punish for contempt of the Board, both direct and indirect, in accordance with
the pertinent provisions of, and the penalties prescribed by, the Rules of Court;

f. To issue subpoena and subpoena duces tecum and summon witnesses to appear in
any proceedings of the Board, to administer oaths and affirmations;

g. To conduct investigations and hearings of complaints for violation of the public

service laws on land transportation and of the Board's rules and regulations, orders,
decisions and/or rulings and to impose fines and/or penalties for such violations;
h. To review motu proprio the decisions/actions of the Regional Franchising and
Regulatory Office herein created;

i. To promulgate rules and regulations governing proceedings before the Board and
the Regional Franchising and Regulatory Office: Provided, That except with respect to
paragraphs d, e, f and g hereof, the rules of procedure and evidence prevailing in the
courts of laws should not be controlling and it is the spirit and intention of said rules that
the Board and the Regional Franchising and Regulatory Offices shall use every and all
reasonable means to ascertain facts in its case speedily and objectively and without regard
to technicalities of law and procedures, all in the interest of due process;

j. To fix, impose and collect, and periodically review and adjust, reasonable fees and
other related charges for services rendered;

k. To formulate, promulgate, administer, implement and enforce rules and

regulations on land transportation public utilities, standards of measurements and/or
design, and rules and regulations requiring operators of any public land transportation
service to equip, install and provide in their utilities and in their stations such devices,
equipment facilities and operating procedures and techniques as may promote safety,
protection, comfort and convenience to persons and property in their charges as well as
the safety of persons and property within their areas of operations;

l. To coordinate and cooperate with other government agencies and entities

concerned with any aspect involving public land transportation services with the end in
view of effecting continuing improvement of such services; and

m. To perform such other functions and duties as may be provided by law, or as may
be necessary, or proper or incidental to the purposes and objectives of this Executive
Order.

Department Order No. 2015-011.

“12. TRANSPORTATION NETWORK VEHICLE SERVICE

Vehicle Type: Sedan, Asian Utility Vehicle, Sports Utility Vehicle, Van, Sport Utility
Vehicle or other similar vehicles
Seating Capacity: Not more than 7 passengers, excluding the driver

Ventilation: Airconditioned

Route: No fixed route

Fare: As set by TNC, subject to oversight from the LTFRB in cases of abnormal disruptions
of the market, such as but not limited to any change in the market, whether actual or
imminently threatened, resulting from stress of weather, convulsion of nature, failure or
shortage of electric power or other source of energy, strike, civil disorder, war, military
action, national or local emergency, or other cause of an abnormal disruption of the
market which results in the declaration of a state of emergency by the President.

Mode of Payment: Pre-arranged

Operation Conditions:

a) Driver must be accredited by the TNC;

b) Driver must hold a professional driver’s license;

c) Driver must be registered with the LTFRB;

d) Vehicle must be accredited by the TNC;

e) Vehicle must not be more than 3 years old from date of manufacture;

f) Maximum age limit of the vehicle is 7 years from date of of manufacture;

g) Vehicle must be equipped with proper tools and equipment;

h) Driver must always have an on-line enabled digital device during a pre-arranged ride;

i) Driver must only carry passengers who pre-arrange rides through TNC-provied online-
enabled application and not through phone call or booking service;

j) Driver is prohibited from accepting street hails from potential passengers;

k) Driver is prohibited from accepting passengers in the airports, unless authorized by the
airport management;

l) Driver must display during trips his Identification Card prescribed by LTFRB;

m) Passengers must be insured with the LTFRB accredited personal accident insurance
providers; and

n) Operators and their drivers must comply with the rules and regulations issued by
government agencies.

Validity: One year and may be renewed. Grantee must always remain in good standing
with the TNC.”

For purposes of this Department Order, the LTFRB is mandated to promulgate the
relevant implementing Memorandum Circular within thirty (30) days from date hereof.

Regarding the TNVS, considering than an accreditation by the TNC is required of the
TNVS applicant, the LTFRB is further directed to accredit the TNCs while waiting
guidance from the legislature regarding regulation of this new industry and to promulgate
the guidelines for their accreditation.
This Department Order amends and supersedes all issuances inconsistent herewith, and
shall take effect immediately, following its publication in a newspaper of general
circulation.

STATUTORY CONSTRUCTION

Public Utility
Are TNVS or Uber/Grab “partners”/drivers/vehicles considered public
utility/transportation?
In De Guzman vs CA, the court ruled that Art. 1732 of the Civil Code which defines a
common carrier Neither does distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one who offers services
or solicits business only from a narrow segment of the general population. So understood,
the concept of "common carrier" under Article 1732 may be seen to coincide neatly with
the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416,
as amended) which at least partially supplements the law on common carriers set forth in
the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes: ... every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any
common carrier…
(Comment: Meaning, as long as your thing is basically accessible to anybody, you are
a common carrier
As applied to Grab/Uber: Yes, Uber/Grab cars will only service those with the app.
But who can download the app and join Uber/Grab? Anybody. Public.)
LTFRB has the authority to regulate the operation of public land
transportation vehicles /public utility pursuant to EO 202 to grant franchises
or certificates of public convenience (“CPC”). This is in line with the standard
classification for public transport conveyance set in DO 2015-011 as a basis for issuances
of CPC for public utility vehicles. The CPC is an authorization from the government to
operate a public utility or a public service. Under the 1987 Constitution, a franchise
for the operation of a public utility must comply with the nationality
requirements. (Article 12, Section 11, 1987 Constitution.)

Public Utility is defined as a business or service engaged in regularly

supplying the public with some commodity or service of public consequence
such as electricity, gas, water, transportation, telephone or telegraph
service. (emphasis added)
Black, Henry Campbell. Black’s Law Dictionary, St. Paul Minn West Publishing Co.,
1968

Transportation is one of the necessities of all persons to go in a certain desired place or

destination in their daily needs and activities. It is defined as the removal of goods or
persons from one place to another, by a carrier.
Black, Black’s Law Dictionary, 1670

Common carriers are persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
Article 1732 of the Civil Code

In our country, one of the means of transportation is with the Public Utility Vehicles.
Public Utility Vehicles also known as PUVs refer to a motor vehicle considered as a public
transport conveyance or common carrier duly registered with the Land Transportation
Office (LTO) and granted a franchise by the Land Transportation Franchising and
Regulatory Board (LTFRB).
Republic Act 10916

The Supreme Court defined a public utility as a business or service engaged

in regularly supplying the public with some commodity or service of public
consequence. The principal determinative characteristic of a public utility is
that of service to, or readiness to serve, an indefinite public or portion of the
public which has a legal right to demand and receive its services or
commodities. However, the fact that a business offers services or goods that
promote public good and serve the interest of the public does not
automatically make it a public utility. The test in determining if a service is a
public utility is whether the public may enjoy it by right or only by
permission.
(JG Summit Holdings v. Court of Appeals, G.R. No. 124293, September 24,
2003.)
Furthermore, the Supreme Court states that public utilities are privately owned and
operated business whose services are essential to the general public…The same is true
with respect to the business of common carrier which holds such a peculiar relation to the
public interest that there is superinduce upon it the right of public regulation when
private properties are affected with public interest hence they cease to be juris private
only. When, therefore, one devotes his property to a use in which the public has an
interest, he, in effect grants to the public an interest in that use, and must submit to the
control by the public for the common good, to the extent of the interest he has thus
created.
(KMU Labor Center v. Hon. Jesus Garcia, Jr. G.R. No. 115381, December 23, 1994, citing
Pantranco v. Public Service Commission)
A certificate of public convenience (CPC) is an authorization granted by the
LTFRB for the operation of land transportation services for public use as
required by law. Pursuant to Section 16(a) of the Public Service Act, as amended, one
of the requirements for its issuance include: (iii) the applicant must prove that the
operation of the public service proposed and the authorization to do business will
promote the public interest in a proper and suitable manner. Before a CPC will be issued,
the applicant must prove by proper notice and hearing that the operation of the public
service proposed will promote public interest in a proper and suitable manner. By its
terms, public convenience or necessity generally means something fitting or suited to the
public need. As one of the basic requirements for the grant of a CPC, public convenience
and necessity exists when the proposed facility or service meets a reasonable want of the
public and supply a need which the existing facilities do not adequately supply. (Kilusang
Mayo Uno Labor Center vs Garcia, G.R. No. 115381 December 23, 1994). The idea of
public use is implicit in the term "public service". A public service is a service for public
use. Public service is a stock phrase found in most definitions of a common carrier and a
public utility. Luzon Brokerage Co., Inc., vs. The Public Service Commission G.R No. L-
37661, Nov. 16, 1932)

To sum it up, public utility is defined as a business or service engaged in regularly

supplying the public with some commodity or service of public consequence or is privately
owned and operated business whose services are essential to the general public. When,
therefore, one devotes his property to a use in which the public has an interest, he, in
effect grants to the public an interest in that use, and must submit to the control by the
public for the common good, to the extent of the interest he has thus created.

Since TNVS, such as Uber and Grab, are engaged in a business whose service is essential
to the general public and the vehicles are devoted to a use in which the public has an
interest, they are considered to be regulated by the LTFRB.
Technically speaking, Uber and Grab are but an app, a technological innovation that
allows lowly Manila commuters the comfort and convenience of a private car from point
A to point B. If passengers are in need of a ride and drivers who are willing to render
service can meet at a price set by the TNC itself.

Logically speaking, booking an Uber or Grab ride has the same public transportation
requirements: a vehicle, a destination, and the money you pay for fare. You book a ride
through Uber or Grab, you use a private vehicle for a public purpose.

Anything that involves operating land transport for the public is within the LTFRB’s
jurisdiction.

POLICE POWER

Jurisprudence defines police power as the power of promoting public welfare by

restraining and regulating the use of liberty and property.

Limitations (Tests for Valid Exercise)

a. Lawful subject- the interest of the public in general as distinguished from those of a
particular class. The activity or property sought to be regulated affects the general welfare
if it does, then the enjoyment of the rights flowing therefrom may have to yield to the
interests of the greater number.

b. Lawful means- the means employed are reasonably necessary for the accomplishment
of the purpose, and not unduly oppressive on individuals.
The priority of LTFRB to regulate the operation of public land transportation vehicles
/public is to promote general welfare (passengers or commuters or the public). In the
guise of police power to promote public welfare, LTFRB must have jurisdiction over
Uber/Grab and other similar ride-sharing services and mandate them to abide the rules
and regulations of the said agency. The pre-arranged transportation services for
compensation using internet-based technology application sought to be regulated affects
the general welfare. Hence, the test of lawful subject is complies.

As to the lawful means, the means will soon be tested if it will be employed reasonably
necessary for the accomplishment of the purpose, and not unduly oppressive on
individuals.
This right of the state to regulate public utilities is founded upon the police
power, and statutes for the control and regulation of utilities are a legitimate
exercise thereof, for the protection of the public as well as of the utilities
themselves. Such statutes are, therefore, not unconstitutional, either impairing the
obligation of contracts, taking property without due process, or denying the equal
protection of the laws, especially inasmuch as the question whether or not private
property shall be devoted to a public and the consequent burdens assumed is ordinarily
for the owner to decide; and if he voluntarily places his property in public service he
cannot complain that it becomes subject to the regulatory powers of the state.
(Pangasinan Transportation Co., Inc vs Public Service Commission G.R. No.
47065, June 26, 1940)

** Rate-making or rate fixing

Moreover, rate making or rate fixing is not an easy task. It is a delicate and sensitive
government function that requires dexterity of judgment and sound discretion with the
settled goal of arriving at a just and reasonable rate acceptable to both the public utility
and the public. Several factors, in fact, have to be taken into consideration before a
balance could be achieved. A rate should not be confiscatory as would place an operator
in a situation where he will continue to operate at a loss. Hence, the rate should enable
public utilities to generate revenues sufficient to cover operational costs and provide
reasonable return on the investments. On the other hand, a rate which is too high becomes
discriminatory. It is contrary to public interest. A rate, therefore, must be reasonable and
fair and must be affordable to the end user who will utilize the services.
Given the complexity of the nature of the function of rate-fixing and its far-
reaching effects on millions of commuters, government must not relinquish
this important function in favor of those who would benefit and profit from
the industry. Neither should the requisite notice and hearing be done away with. The
people, represented by reputable oppositors, deserve to be given full opportunity to be
heard in their opposition to any fare increase. (KMU vs Garcia,1994 GR 115381)

** ON THE ISSUE OF REGULATION

Deregulation, while it may be ideal in certain situations, may not be ideal at all in our
country given the present circumstances. Advocacy of liberalized franchising and
regulatory process is tantamount to an abdication by the government of its inherent right
to exercise police power, that is, the right of government to regulate public utilities for
protection of the public and the utilities themselves. (KMU vs Garcia,1994 GR 115381)
** OBSERVANCE OF PASSENGER RIGHTS
(MOVE OF THE CONGRESS TOWARDS REGULATING UBER/GRAB)

Transport Network Companies (TNCs) have recently emerged as a new mode

of transportation. Generally, TNCs involve a third-party corporation (such as Uber or
Grab) that provide clients with smartphone applications which connect them with drivers
who transport them to their location, TNCs online applications connect passengers with
drivers in real time; hence, eliminating the uncertainty of waiting for long hours when an
available taxi would arrive. TNCs are classified as common carriers once a passenger
avails of their service and by reason of the nature of their business, should observe
extraordinary diligence in their vigilance over the safety of the passengers transported by
them. Prudent regulation is necessary for government to ensure the highest
degree of service for the general public. In particular, all modes of
transportation, whether traditional or innovative, must be regulated to
ensure the safety and comfort of passengers; to hold erring or abusive
operators and drivers accountable; and to ensure that an adequate number
of public transportation units are available in all areas. Regulation should
not stifle innovation, especially when the same can alleviate the woes of our
general public who struggle with traffic congestion every day and to ensure
that the paramount interest of the public is protected and conserved.
(Senate Bill No. 1501, filed by Sen. Poe) ((Sorry di siya legally binding kasi bill pa
lang siya as of the moment pero the reasons behind may be convincing why it should be
regulated ))

TNCs and TNVs are obligated under a contract of carriage. As a common carrier, liability
attaches once the contract between a TN, a TNV, and a TNC is executed. A TNC therefore
cannot evade liability by contending that they are merely a technological platform to
connect the TNP with the TND. The TNC is the means and method by which the
transportation service is arranged and facilitated. Furthermore, they amass profit from
facilitating the TNVs. They must be responsible for the service they provide and
be held liable for any breach on the contract of carriage. Towards this end,
the State shall enact measures for the development and regulation of
transportation network companies and vehicles and to ensure the safety of
both the driver and the riding public. (Senate Bill No. 1001, filed by Sen.
Gatchalian) ((Sorry di siya legally binding kasi bill pa lang siya as of the moment pero the
reasons behind may be convincing why it should be regulated ))

Likewise, former Transportation Sec. Mar Roxas issued Department Order No.
2012-01 mandating the strict implementation of of precautionary, safety and
security measures to ensure safe, fast, efficient and reliable transportation
services. This order directed the observance of passenger rights:

“I. OBSERVANCE OF PASSENGER RIGHTS

1. All agencies regulating transportation providers shall ensure that the following rights
of all passengers are observed at all times:

1.1. Every public transport vehicle conveying passengers and cargo is duly registered with
the concerned regulating agency and possesses the required safety and security
certificates.”