Opinion No. 19-44 Re: Retail Trade; Event Organizer providing catering services

Securities and Exchange Commission Republic of the Phitippines Department of Finance

OFFICE OF THE GENERAL COUNSEL

04 October 2019

Re: Retail Trade; Event Organizer SEC-0GC 0pinion No. 19-44

providing catering services

Mr. Przemyslaw Adam Floras

5 Noreco Rd, Mangnao, Dumaguete City PAFKRU SK Inc. Negros Oriental

Dear Mr. Floras

on whether the business model of PAFKRU SK Inc. (PAFKRU) constitutes This refers to your letter dated 25 April 2019 requesting an opinion

Retail Trade Liberalization Act of 2000 (RTLA). retail trade under Republic Act (R.A.) No. 8726, otherwise known as the

equity primarily engaged in event management services, which includes It is averred that PAFKRU is a domestic corporation with 40% foreign

party catering services. It has no intention to operate restaurants and aims

during events only. to provide by itself, its subsidiaries or subcontractors catering services

PAFKRU's business model, as you described, is that of an event caterer that offers service packages, rather than standard produce. These service You gave as an example a wedding celebration where a caterer is hired by packages usually include preparation, logistics, rental, delivery and set-up of tables, chairs, cutleries, including delivery and display of food and beverages

provided for in a contract. The corporation does not habitually sell or charge the bride and groom to provide a packaged service during the event as anything to the attending guests. It interacts only with the bride and groom as customer via appointment and its only interaction with the general public or attending guests happens during the actual event.

Page 2 of 4 Hence, this request with the following queries:

1. Should an event catering provider be considered as retailer, engaging in retail trade?

2. Would a single customer lounge offering goods, commodities and merchandise like those commonly offered by coffee shops be considered a retail trade?

calling of habitually selling direct to the general public merchandise, commodities or good for consumption. Section 3 of the RTLA defines retail trade as any act, occupation or

elements should concur: For sales transaction to be considered as "retail" the following

2.The sale must be direct to the general public; 1. The seller should be habitually engaged in selling: 3. The object of the sale is limited to merchandise, commodities or goods for consumption.1

FIRST QUERY

retailer under the RTLA. Event organizing involves a contract of services, not simply renders his services for hire or pay. sale. PAFKRU's business model, involves a packaged service. An event organizer sells no goods, merchandise or commodities to his customers but Solely as an event organizer, PAFKRU shall not be considered a

under the RTLA. Catering is sale of food eaten2 and falls within the definition of retail trade. However, as an event caterer, PAFKRU shall be considered a retailer

second requisite, PAFKRU alleges that its catering business will be tailor- made (e.g. theme, menu, design), to particular customers (e.g. bride and groom in a wedding occasion) thus, not readily available to the general public. Hence, element no. 2 is not present. The presence of the first and third requisites are clear. As to the

1 SEC-OGC Opinion No. 18-10 dated 04 June 2018 addressed to First Associated Medical Distribution Co.9 2 Department of Justice (DOJ) Opinion No. 248 s. 1954 dated 22 September 1954

Page 3 of 4

accordingly, "public" has been employed as meaning the body of the people at large; and "sales to the public" has been held to mean sales to the community at large, all of the inhabitants of a particular place and not limited context in which it is found. In one sense, the "public" is everybody; The word "public" has been defined differently depending on the

have held that "public" does not mean all of the public, nor most of the to portion of the people (People vs. Huthven, 288 N.Y.S. 631) Other cases

contradistinguishes them from a few (State v. Luce, Del., 32A. 1076; State vs. people, nor very many of the people of a place, but so many of them as Baker , 102 N.E. 732; People vs. Powell. N.W. 372).3

retail business services only an exclusive group, as in the case of restaurant within the purview of the Retail Trade Nationalization Law. catering solely to the members of the Casino Espanol4 or of a Chinese druggist dealing solely with persons with Chinese blood5, it does not fall Based on the foregoing, it was previously ruled that were a particular

catering business include those celebrating weddings, baptisms, birthdays, element of "exclusivity" is lacking. It would seem that PAFKRU's customers celebrating an event is a potential customer. The end-users for an event are no less than the "general public." In a catering business, every consumer anniversaries, etc... Thus, selling to this group of customers is "selling to the general public." We are unable to apply the above ruling to the instant case. The

sales arising from restaurant operations of a hotel owner or in-keeper may treated as incidental only to PAFKRU's services as event organizer because like PAKFRU providing food is actually an event caterer. not be applied by analogy in this case because catering of food should not be the biggest expense in catered events is food. Effectively, an event organizer Furthermore, the exception granted under the RTLA and its IRR6 to

event catering shall be considered retail trade under the RTLA. Based on the foregoing, the business model of PAFKRU which includes

SECOND QUERY

4 DOJ Opinion dated 30 October 1968 5 DOJ Opinion No. 47, s. 1955 6 Sec. 2. Sales Not Considered As Retail. - The following sales are not considered as retail: 3 DOJ Opinion No. 47, s. 1955 and Opinion dated 30 October 1968

1 v

capital, provided, that the restaurant is incidental to the hotel business xxx'; (c) Sales arising from restaurant operations by a hotel owner or inn-keeper irrespective of the amount of (emphasis supplied) XXX XXX XXX

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merchandise in a single customer lounge may be considered retail trade, we answer in the affirmative. On the issue of whether the sale of goods, commodities and

sale" refers only to the sale by a manufacturer of its products manufactured in the Philippines. The exception granted under the RTLA and its IRR 7 to a "single outlet

single customer Iounge where PAFKRU can accommodate inquiries and hold meetings with its prospective customers will sell commodities/merchandise (e.g. refreshments and light snacks) that may be purchased by walk-in customers without engaging in further business. In this case, PAFKRU is not a manufacturer. Further, the proposed

already engage in retail trade under the RTLA as all the elements of the retail trade will be present. PAFKRU will be habitually selling direct to the general public merchandise, commodities or good for consumption. In opening a customer lounge selling merchandise, PAFKRU will

facts relied upon are different, this opinion shall be rendered null and void. solely on the facts disclosed in the query and relevant solely to the particular issues raised therein and shall not be used in the nature of a standing rule binding upon the courts, or upon the Commission in other cases of similar or dissimilar circumstances.8 If upon investigation, it will be disclosed that the It shall be understood that the foregoing opinion is rendered based

CAMWO S.CORREA

General Counsel tN

assembled in the Philippines, irrespective of capitalization; 7 Supra. Sec. 2. Sales Not Considered As Retail. -- The following sales are not considered as retail: XX (d) Sales through a single outlet owned by a manufacturer of products manufactured, processed or XXX (emphasis supplied) XXX XXX XX

8 SEC Memorandum Circular 2003-15, No. 7.