Tuesday, January 26, 2010

On Apparent Authority for Cebu Pacific and Nestle Philippines: Repost from Emil Jurado, Manila Standard January 26 2010

After making headlines for more than a week, the news item about two children with special needs and their mothers who were forced to disembark from a Cebu Pacific plane is quieting down.

The story had all the ingredients of a perfect storm. It drew the kind of attention that it deserved. More than basic consumer rights, it touched on human rights, especially the rights of children.

Not surprisingly, various groups scored Cebu Pacific for its discriminatory actions. But what surprised me was the airline’s reaction to the scandal. It would have been so easy for the airline to put the entire blame on the erring employees—the Filipino colloquial term “laglag” being the perfect word to describe the action. They could have had a team of lawyers and spokesperson to mouth the worn-out argument that the individual actions and lapses in judgment of our staff cannot be held against the company. But they chose not to. Cebu Pacific actually owned up to its employees’ fault, apologized for it, and took conciliatory measures.

At least, some companies understand the legal principle of apparent authority as a rule that applies to situations such as the Cebu Pacific gaffe. Apparent authority states that a principal is responsible for the acts of its agents.


Sad to say, some firms cannot seem to grasp this concept of apparent authority either out of ignorance or malice. Recently, a hornet’s nest the size of Switzerland was stirred when a top multinational was assailed by its Central Luzon distributors for failing to prevent a billion-peso scam perpetrated by one of its high-ranking officials.

My gulay, what makes matters worse is that the architect of the foul scheme seems to have operated in plain sight, acting in her capacity as the regional sales manager of the multinational.

This manager allegedly instructed her distributors to give preferential discounts to the tune of 12-percent in favor of one particular reseller, Company X. The distributors were stumped on how they could possibly do that, since the maximum discount they could give was only 4-percent. Not to worry, the manager said, who wrote them letters using the company’s letterhead, promising that the multinational would cover the difference. And since the manager was a well-decorated and high-ranking employee, they complied.

Company X’s goods now acquired at an illogically cheap rate, all it had to do was go to a consumer area in Metro Manila and undersell all other distributors. Pretty soon, retail outlets were almost exclusively ordering from Company X at the expense of other Metro Manila distributors. Santa Banana, don’t forget that all these distributors were supposedly part of the same team!

The Metro Manila and Central Luzon distributors felt antsy. The multinational refused to investigate, and after months of reassurances, not a single centavo of discount reimbursements came.


They say hindsight is 100-percent accurate, but even the smallest of due diligence could have prevented the financial collapse of countless distributors.

My gulay, didn’t the multinational wonder how a previously-unheard of reseller could have come to Metro Manila and taken royal customers away from existing distributors? Based on figures submitted, didn’t the multinational question how a company could sell items for so low?

Ultimately, I feel that it is the legal principle of apparent authority that will put the case to rest. Even if the manager acted on her own as claimed, the law doesn’t favor the cop-out (palusot). The distributors are set to file a class-action against the multinational, where the buck should stop.


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