Baldeo, Francis Sales O.

Castillano, Marmie

Iligan, Jan Rockefeller C.

Jainani, Cush Ravin E.

Leones, Lorille J.

Señores, Mary Louis A.

Sermonia, Korina Cyril A.

RIDE-HAILING: TNC and TNVS

A. Terms defined

One of the often-heard and used words in the past decade is “ride-hailing.” Ride-hailing is simply an act
of hiring a driver (usually by flagging down his vehicle) to take them exactly where they need to go. The
word, however, has since expanded its meaning thanks to the recent technological developments.
Today, “ride-hailing” is more commonly associated with booking rides and paying for car service through
a smartphone app with a Transportation Network Company (TNC) such as Grab or Uber. The TNC will
then send a vehicle, known as Transport Network Vehicle Service (TNVS), to fetch the passenger (or
cargo) and take him to where he needs to go.

In 2015, the Department of Transportation (DOTr) classified TNC and TNVS as modes of public
transportation through Department Order 2015-011. In the said D.O., TNC was defined as “an
organization whether a corporation, partnership, or sole proprietorship that provides pre-arranged
transportation services for compensation using an internet-based technology application or digital
platform technology to connect passengers with drivers using their personal vehicles.”

Meanwhile, TNVS was given a formal definition in DOTr D.O. 2017-011 as “a public utility vehicle
accredited with a Transport Network Corporation (TNC) which is granted authority or franchise by the
LTFRB to run a public transport service.”

B. Ride-hailing history

Ride-hailing technically began in 1605 when the first taxi – by way of horse and carriage – was
implemented. However, ride-hailing, in the modern sense of the word, can be traced back to 2011 when
“UberCab” – which later became “Uber” – was officially launched in San Francisco, California. In the
following year, competitors such as Lift and GrabTaxi (later known as “Grab”) swiftly entered the arena.
In 2013, Grab expanded its operations from Malaysia to the Philippines, and in the following year, Uber
entered the country to compete with the former. In 2015, the DOTC finally acknowledged that ride-
hailing services were here to stay; thus, it issued a regulation that legally identified an app-based
transport service as a TNC and allowed and required a vehicle used by a TNC to apply legally for a
franchise as a TNVS. TNC and TNVS were also classified as new ways of delivering and offering public
transportation. Grab would later buy Uber’s operations in Southeast Asia, and in 2018, Uber officially
ended its service in the Philippines. The following year, other TNCs, such as ePickMeUp, Go Lag, and
Snappy, were allowed to operate in the country, but none of them really posed a threat against Grab.

Below is a more detailed timeline of the history of ride-hailing:

1605: first taxi; by way of horse and carriage

Ridehailing in the Modern Sense of the Word

2011: “UberCab” was officially launced in San Francisco; it offered only black luxury cars with
private drivers and prices 1.5 times that of a standard cab; later changed its name to “Uber”

2012: due to a high demand from the public, Uber launched a service in Chicago allowing riders
to request a regular taxi or an Uber driver with its mobile app; UberX was introduced, allowing
people to drive for Uber using their own vehicles, subject to meeting certain vehicle standards;
in the same year, competitors such as Lyft (USA), DiDi (China), and GrabTaxi (Malaysia) came
onto the scene

2013: GrabTaxi expanded to the Philippines

2014: Uber expanded its operations by providing other options such as carpooling and parcel
and food delivery services; Uber was officially launched in the Philippines

2015: the DOTr acknowledged that ridehailing services were here to stay by drafting regulations,
legally identifying an app-based transport service as a Transport Network Company (TNC); the
regulations also allowed and required a vehicle used by a TNC to apply legally for a franchise as
a Transport Network Vehicle Service (TNVS); TNC and TNVS were also classified as public
transportation; later that year, several transport groups opposed the accreditation of TNCs and
issuance of franchises to TNVS as these new competitors had made a huge dent in their income

2016: GrabTaxi rebranded to Grab and later mimicked Uber’s expansion to include in its services
carpooling and delivery options

2018: Grab bought Uber’s operations in Southeast Asia; later that year, Uber officially ended its
service in the Philippines

2019: Other TNCs were allowed to operate, including ePickMeUp, Go Lag, Hirna, Snappy, but
none of them really posed a threat against Grab

C. Present challenges
Today, ride-hailing is still undergoing major developments, including the issue of whether motorcycle
taxis should be allowed to operate as TNVS. The operations of motorcycle taxis like “Angkas” and
“JoyRide” were earlier brought to a halt as under Republic Act 4136 or the Land Transportation and
Traffic Code, motorcycles can only be registered as private or government vehicles. They were only
allowed to resume their operations by virtue of a provisional authority from the Motorcycle Taxi
Technical Working Group. Currently, there are several bills, both from the Senate and the House of
Representatives, that seek to amend R.A. 4136 to accommodate these motorcycles-for-hire.

Another issue that continues to hound ride-hailing services is the prevalence of food delivery scams,
wherein customers will suddenly cancel their orders, give wrong addresses, or do not show up at the
agreed upon place of delivery. To remedy this issue, a Senate Bill (Senate Bill No. 1677) was filed seeking
to protect food delivery drivers from such scams.

Ride-hailing in the Philippines is still in its infancy, and thus, more related issues can be expected to
arise. However, like other public services which have become ingrained in our daily lives, they can be
addressed and improved, and by and by, it will run smoother than before.

D. Ride-hailing regulations

To help the country adapt to the public transportation innovations brought about by ride-hailing apps,
the DOTr and the LTFRB issued several Department Orders and Memorandum Circulars respectively.

DOTr D.O. 2015-011 was the one that officially classified TNVS and TNC as new modes of public
transportation. In this issuance, TNVS was classified as a form of an Online-Enabled Transportation
Service (OETS), where drivers are connected with potential customers who requests for a ride through
an internet-based digital technology application. Once a request is accepted, the driver picks up the
customers and brings them to their desired destination. Meanwhile, the service providers which provide
this type of Application and facilitate this new type of transportation service is referred to in many
jurisdictions as Transport Network Companies (TNC). In the same issuance, TNC was given a formal
definition, which was borrowed from the California Public Utilities Commission (see the definition under
“A. Terms defined”).

In 2017, the DOTr issued D.O. 2017-011 or the Omnibus Guidelines on the Planning and Identification of
Public Road Transportation Services and Franchise Issuance. Here, the TNC definition from the previous
D.O. was carried over and TNVS was formally defined (see the definition under “A. Terms defined”).
TNVS’ operation was classified as door-to-door service, and therefore, they do not have specific routes.
As to fare collection, it is pre-arranged as authorized by the LTFRB.

In 2018, TNC and TNVS were officially classified as public utilities by virtue DOTr D.O. 2018-013. As
defined in this issuance, public utility is “a business of service engaged in regularly supplying the public
with some commodity or service of public consequence. Its principal determinative characteristic 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.” As early as 2016, the LTRFRB had been regulating TNC
and TNVS, and this issuance affirmed the LTFRB’s power to regulate and supervise TNC and TNVS and to
issue Certificate of Public Convenience (CPC) for both.

Pursuant to its authority granted by the said D.O., the LTFRB issued several Memorandum Circulars to
regulate TNC and TNVS. In 2018, LTFRB MC 2018-003 was issued to set a common supply base for TNVS,
considering the average daily books, request for bookings, and concerned bookings of TNCs, and
considering the number of part-time and full-time drivers. It also set a limitation on the age of the
vehicles allowed to operate as TNVS: three (3) years from the date of manufacture.

In 2020, to cope with the pandemic, the LTRFRB issued MC 2020-018 to provide guidelines for the
operations of in areas under GCQ. TNVS were allowed to operate provided that they conform to several
conditions, including that (1) the driver is a holder of a valid CPC or existing Provisional Authority (PA),
(2) the bookings and payments must be done strictly through an online facility or electronic payment
provided by a duly accredited TNC, and (3) the unit must be registered and with a valid Personal
Passenger Insurance Policy. Additional guidelines, such as that the driver shall wear masks and gloves all
the time and that the passengers are required to wear masks to be allowed to board, were also provided
in the said issuance.

To protect the drivers from sudden cancellations from the passengers, the LTFRB issued MC 2020-028.
This issuance provided guidelines to safeguard fair and responsible use of ridesharing services by
imposing cancellation fees. A cancellation fee shall be charged by TNCs when the passenger cancels
after five (5) minutes from the time the booking has been confirmed or when the passenger does not
show up at the pick-up location within five (5) minutes from the driver’s arrival

E. Jurisprudence

In 2019, the Supreme Court resolved a controversy involving LTFRB and a TNC that operated without
securing a TNC accreditation or a CPC from the LTFRB.

In the case of LTFRB v Valenzuela, the LTFRB publicly declared that DBDOYC, the company that launched
“Angkas,” an online motorcycle-hailing application that pairs motorcycle drivers with potential
passengers, could not legally operate since it did not obtain the mandatory certificates of TNC
accreditation or CPCs both for DBDOYC and its drivers. A writ of preliminary injunction against LTFRB
was secured by DBDOYC from the RTC, preventing LTFRB from interfering with Angkas’ operations. The
LTFRB, thereafter, elevated the case to the Supreme Court.

In deciding whether the RTC committed a grave abuse of discretion amounting to lack or in excess of
jurisdiction in issuing the assailed writ of preliminary injunction, the Court held in the affirmative, for
DBDOYC had no present and unmistakable right to engage in the business of carrying or transporting
passengers.

As regards whether DBDOYC and its drivers shall secure a CPC before it could operate, the Court also
held in the affirmative since they are engaged in public service. Under CA 146, no public service shall
operate in the country without having first secured a CPC. Contrary to DBDOYC’s argument, the
arrangement between its drivers and the passengers is not purely private since there was no contractual
discretion between the said parties. The app automatically pairs the would-be passengers and the
Angkas bikers, so there is no true choice on these material contractual points. Moreover, despite the
application’s limited market scope (i.e., Angkas users), it remains that the Angkas bikers offer their
services to willing public consumers and these services may be accessed by anyone who downloads the
Angkas app. It is also of no material that the bikers may refuse any time by simply not going online, for
when they do so log-in, they make their services publicly available.

F. Nature of TNC and TNVS as carriers

TNVS are common carriers engaged in public service.

Article 1732 of the Civil Code defines common carriers as “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.”

TNVS squarely fits this definition, for they offer their services to the willing public consumers for
compensation. Despite the irregularity of their schedule and the limited market scope, TNVS are still
considered as common carriers, for the term “public service” under CA 146 or the Public Service Act
covers any person who owns, operates, manages, or controls 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.

This nature of TNVS is affirmed in the aforesaid case of LTFRB v Valenzuela, when the Court declared the
Angkas bikers as common carriers.

With regard to the nature of TNCs, neither the existing rules nor the current jurisprudence categorically
states its nature as a carrier. TNCs are only considered as “transport providers.” While TNCs appear as
though they merely function as booking agents or third-party liaisons for its TNVS, their nature –
whether they are private or common carriers – would depend on the circumstances and agreement
between the parties, i.e., whether the driver of the TNVS is the TNC’s employee or agent or a mere
independent contractor. A TNC would be considered as a common carrier if its TNVS drivers are its
employees. On the other hand, if the TNVS drivers are independent contractor, then the TNC would not
be classified as a common carrier. This is echoed in the LTFRB v Valenzuela case when the Court
declared that “such liability (failure to exercise due diligence and reasonable care) shall not extend to
actions of drivers who are independent contractors who provide the transportation services directly to
passengers.”

References:

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