Philippines: Overview

The Association of Southeast Asian Nations (ASEAN) is a regional group in Asia comprising ten countries, namely, Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Founded in 1967, the ASEAN now seeks economic integration,1 that is, ‘to transform ASEAN into a region with free movement of goods, services, investment, skilled labour, and freer flow of capital’,2 in the context of ‘open regionalism’.3 In line with this, ASEAN member states will endeavour to introduce competition policy4 in their respective territories by 2015.5 Towards this end, the ASEAN has adopted the Regional Guidelines on Competition Policy (the Guidelines).

The existing Philippine legal framework for competition law is not fully compliant with the Guidelines. Throughout the years, the Philippines has enacted fragmented legal provisions (usually part of general statutes) and sector-specific issuances prohibiting certain anti-competitive acts. The Philippines has yet to promulgate a comprehensive antitrust statute to fully cover the anti-competitive acts mentioned in the Guidelines. For example, at present, with the exception of cartelisation and bid rigging, specific anti-competitive agreements such as the division or allocation of markets are not expressly prohibited in the Philippines. Predatory pricing is not generally prohibited; it is currently unlawful only in limited industries such as the downstream oil industry. There is likewise no central, specialised Philippine government agency for antitrust matters. Also, the enforcement mechanisms currently in place are insufficient to support greater competition in the market and protect all players, large and small alike.

When the current president of the Philippines, Benigno Simeon C Aquino III, assumed office in 2010, he identified the passage of comprehensive antitrust legislation as a priority measure.6 But three years into his six-year term, such legislation has yet to be passed. There have been several attempts by the Philippine Congress, including the 15th Congress (whose term ended in June 2013) and the current 16th Congress, to pass comprehensive antitrust legislation for the Philippines. The current speaker of the Philippines’ House of Representatives, citing the Philippines’ ASEAN commitments,7 has himself authored a bill for that purpose and indicated that antitrust legislation will be tackled during the current session.8 Other legislators, both in the House of Representatives and the Philippine Senate, have filed similar antitrust bills. Given the Philippine Congress’ recent lack of success in passing antitrust legislation, the Philippines’ historical and social circumstances (which have largely concentrated economic power in the hands of a few) and the general lack of awareness or enforcement of present Philippine competition laws (for example, no criminal antitrust case on unlawful combinations in restraint of trade on unlawful monopolisation has been resolved by the Supreme Court to date), it will be interesting to see if the Philippines can comply with the 2015 ASEAN deadline for the enactment of a comprehensive competition law.

The Philippines: a background

The Philippines’ difficulties as regards enacting and enforcing meaningful antitrust legislation are arguably linked to its colonial past and elite-centric present.

In 1521 the Philippines was colonised by Spain, and this regime lasted for more than 350 years.9 In 1898 the Philippines became a dependent territory of the United States,10 a status it had until 1946 (save for the three-year period of Japanese occupation in the Philippines during World War II). Throughout the Philippines’ 400 hundred-plus years of colonisation, a Filipino elite class was cultivated, first through the hacienda system established by the Spaniards11 (who also established monopolies in several industries) and later, as part of the US pacification programme. As a result, the democratic process – and economic power – was ultimately controlled by such elite class.

Several presidents were elected after Philippine independence was re-established in 1946. Among them was the dictator Ferdinand Marcos, who assumed office in 1965. He imposed martial law from 1972 to 1981, and during his reign, cronyism and protectionism flourished. In 1986, the Filipinos overthrew President Marcos through a historical people power revolution and Corazon Aquino became president.12 President Aquino restored democracy and started a programme of liberalisation, privatisation, and deregulation.

The Philippines has been characterised as a mixed market economy (ie, a market where there is free enterprise, albeit with government interference).13 However, it has been said that the Philippines has historically been the exclusive arena of the privileged.14 Even if the country is now a democratic and republican state,15 political clans rule the Philippine government, especially Congress.16 These influential members of Congress are themselves corporate owners/majority stockholders of dominant firms,17 who are able to continue protecting their own business interests through the legislative process.

The culture of wealth accumulation by the elite few thus traces its roots to the Spanish period and the American colonial rule.18 A very high concentration of ownership in the country persists: over the past 25 years, only around 160 families have controlled political and socioeconomic power in the Philippines.19 Despite the Philippines’ recent recognition as an ‘Asian tiger economy’, this concentration of wealth in the hands of a few appears to persist in the country. In 2011, it was observed that ‘the 40 richest families on the Forbes wealth list accounted for 76 per cent of the country’s gross domestic product [GDP] growth.’20 Compounded by the lack of valuable participation by small and medium-sized enterprises (SME),21 this concentration of ownership poses a challenge to the pursuit of competition and consequently, the implementation and enforcement of a comprehensive antitrust law.

There are other factors that have contributed to the difficulty of fostering competition (and competition law) in the Philippines. Existing players have heavily invested in their respective sectors, so that large capital requirements and economies of scale have made it difficult to compete.22 In addition, corruption and bureaucracy are cited as considerable structural constraints impeding economic progress.23 According to the World Economic Forum (WEF), the Philippines is currently ranked 59th out of 148 countries in terms of global competitiveness.24 Corruption has been cited as the top problem, followed by an inefficient government bureaucracy for the country’s lack of competitiveness.25 However, the WEF report recently recognised that the Philippines has made significant strides against corruption.26

Existing Philippine legal framework on competition law

The Philippines has competition laws, albeit fragmented. The main Philippine legal provisions on competition are article XII, section 19 of the 1987 Philippine Constitution; articles 185 to 186 of the Revised Penal Code (RPC); and article 28 of the Civil Code. There are also sectoral laws intended to govern competition in particular sectors.

The Philippine Department of Justice (DOJ) was constituted by the Philippine President as the country’s Competition Authority in 2011;27 however, there is no centralised, specialised government agency to enforce Philippine competition laws. Instead, there are numerous bodies that act as such, at least in so far as their respective sectors or industries are concerned.

The Philippine Constitution28

The Constitution sets forth the basic Philippine policy on antitrust regulation. Article XII, section 19 says: ‘The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.’ The Philippine Supreme Court has interpreted that provision (and its predecessor provisions in earlier Constitutions) to mean that monopolies are not illegal per se, but are subject to regulation. It is within the state’s discretion to regulate or prohibit monopolies as required by public interest.29

On the other hand, combinations in restraint of trade are absolutely prohibited.30 That said, what the Constitution arguably proscribes are unreasonable restraints of trade. Several Supreme Court decisions (although predating the 1987 Constitution and even the RPC) have upheld non-compete clauses in employees’ contracts as long as the non-compete obligation was properly limited as to scope, duration and location.31

We have not yet found a Supreme Court ruling declaring an entity a combination in restraint of trade, or prohibiting or ordering divestment from an entity because the latter was found to be an illegal monopoly or combination in restraint of trade.

The RPC32

While the Constitution provides for basic Philippine policy on antitrust regulation, the main law addressing anti-competitive behaviour is found in the RPC.33  In fact, the RPC preceded the Constitutional provision on monopolies and combinations. Article 185 of the RPC prohibits and criminalises bid rigging in public auctions.34 On the other hand, article 186 prohibits and criminalises the following acts:

  • a conspiracy or combination in the form of a trust or otherwise, in restraint of trade or commerce or to prevent by artificial means free competition;
  • monopolising any merchandise or object of trade or commerce, or combining with any other person or persons to monopolise any merchandise or object, in order to alter the price thereof by spreading false rumours or making use of any other article to restrain free competition in the market; and
  • a combination, conspiracy or agreement between a manufacturer, producer, processor or importer and any other persons for the purpose of making transactions prejudicial to lawful commerce, or of increasing the market price of any merchandise or object of commerce.

The present form of article 186 was taken from articles 543, 544 and 545 of the old Penal Code,35 as well as Act No. 3247 (An Act to Prohibit Monopolies and Combinations in Restraint of Trade),36 (part of) which was in turn based on the Sherman Antitrust Act of the United States. Thus, recourse may be had to American authorities interpreting the Sherman Act as regards an article 186, paragraphs 1 and 2 interpretation.37 That said, we doubt that illegal per se violations are possible under article 186. This is because the article 186 crimes are intentional felonies under the RPC and, accordingly, criminal intent/malice must be established.38

Article 186 continues to be the law directly applicable to (unlawful) monopolies and combinations in restraint of trade.39 However, article 186 has not been an effective deterrent to monopolies and combinations in restraint of trade as we are not aware of any business enterprise that has been convicted under the antitrust provisions of the RPC.40 Save for a pre-RPC case,41 there have been no criminal antitrust cases that have been decided by the Philippine Supreme Court. Indeed, there has only been one occasion where the Supreme Court meaningfully discussed article 186. This was Gokongwei v Securities and Exchange Commission,42 which was not even a criminal case. In its ruling there, the Supreme Court stated that a person is prohibited from serving at the same time as a director in any two or more corporations, if such corporations are, by virtue of their business and location of operation, competitors so that the elimination of competition between them would constitute violation of the antitrust laws, namely, the Constitution and article 186 of the RPC.

What is considered Philippines’ first cartel case came only in November 2011 (or almost 80 years after article 186’s enactment), when the DOJ recommended the filing of a criminal cartel case against liquefied petroleum gas marketers for violating article 186, paragraph 1 of the RPC and the cartel provisions of Republic Act No. 8479, which is the Downstream Oil Industry Deregulation Act (Oil Deregulation Act), in light of the marketers’ alleged price-fixing.43

Civil Code44

Article 28 of the Civil Code gives a cause of action for damages to any person who suffers damages due to unfair competition. This means an individual must file a complaint before the courts in order to recover damages for their injury. The complaint cannot be filed by the state on the individual’s behalf. To date, however, we are not aware of any court decision (and certainly no Supreme Court decision) awarding damages based on article 28 of the Civil Code.

Other Philippine antitrust legislation

In addition to the foregoing main Philippine antitrust laws, there are other Philippine legal provisions scattered in several statutes that seek to prohibit certain anti-competitive acts.

For example, section 5 of Republic Act No. 7581, otherwise known as the Price Act,45 prohibits cartelisation designed to manipulate prices of basic necessities and prime commodities.46The Oil Deregulation Act prohibits cartelisation47 and predatory pricing48 in the downstream oil industry. Section 24 of the Cheaper Medicines Act49 prohibits any person from engaging in cartelisation and other acts in restraint of trade in medicines. The Consumer Act50 prohibits deceptive51 and unfair or unconscionable acts or practices.52 Chapter IX of the Intellectual Property Code of the Philippines53 (IPC) requires technology transfer arrangements54 to contain certain mandatory provisions55 and exclude prohibited provisions,56 with the aim of encouraging the transfer and dissemination of technology; and preventing or controlling practices and conditions that may in particular cases constitute an abuse of intellectual property rights and thus, having an adverse effect on competition and trade.57

As regards mergers, the Corporation Code requires mergers and consolidations of corporations to be approved by the Securities and Exchange Commission (SEC).58 However, the merger or consolidation of banks or banking institutions, building and loan associations, trust companies, insurance companies, public utilities, educational institutions, and other special corporations governed by special laws (such as pre-need companies) must first obtain the favourable recommendation of the appropriate government agency-industry regulator. In general, the SEC does not look into the anti-competitive nature or effects of a merger. The SEC’s rules generally require it to approve mergers on the basis of observance of general corporate procedures. However, some regulatory agencies in certain sectors that are required to give their favourable recommendation do look into the anti-competitive aspects of the merger. For these sectors, the SEC usually relies on these agencies to evaluate the anti-competitive nature or effect of the merger.

Existing institutional framework

At present, there is no single specialised agency charged with competition enforcement in the Philippines. Instead, various laws have created agencies empowered to enforce competition laws as follows:

  • The DOJ, which is tasked with prosecution of violations of crimes and felonies in the Philippines in general, and also under articles 185 and 186 of the RPC; cartelisation under the Price Act;  cartelisation under the Cheaper Medicines Act; and deceptive or unfair trade practices under the Consumer Act. As mentioned, the DOJ was named by the president of the Philippines as the Competition Authority, with powers to enforce competition laws and investigate and prosecute violators.59 Pursuant to such designation, the Office for Competition was created by the DOJ.60 However, the DOJ is a not a specialised agency specifically tasked with enforcing competition law. Its designation as a Competition Authority appears to have been made pursuant to its general mandate to enforce laws and investigate and prosecute offenders, as well as to act as the government’s principal legal counsel and prosecution arm.61
  • The Department of Trade and Industry (DTI), under which the Bureau of Trade Regulation and Consumer Protection functions as a policy-making body that oversees the overall implementation of trade and consumer protection laws.62 The DTI implements the Consumer Act’s provisions on the protection of consumers against deceptive, unfair and unconscionable sales acts or prices.63 The DTI also has responsibility for the enforcement of the Price Act in relation to certain basic necessities64 and prime commodities.65

There are also industry-specific regulators that are tasked with enforcing competition laws specifically applicable to the protection of competition only in their respective industries. These include the following:

  • The Joint Task Force of the DOJ and Department of Energy, which oversees competition in the oil sector. It has the power to investigate any complaint filed by any person regarding cartelisation and predatory pricing, and to direct the regular criminal prosecutors of the DOJ to prosecute cartelisation or predatory pricing before the Regional Trial Courts.66
  • The Energy Regulatory Commission (ERC) for the energy sector, which is empowered by the Electric Power Industry Reforms Act67 to promulgate rules and regulations to promote competition, encourage market development and customer choice, and discourage or penalise abuse of market power, cartelisation and any anti-competitive or discriminatory behaviour.68 The ERC has issued competition rules applying to the energy sector.69
  • The Central Bank, which supervises the Philippine banking sector.70 The Central Bank is not bound by any express antitrust criteria, although under its rules71 it may consider whether a merger or consolidation will result in a more viable financial institution as a result of cost savings and an improved competitive position.
  • The National Telecommunication Commission (NTC), which is empowered to regulate rates when ruinous competition results or when a monopoly or a cartel or combination in restraint of free competition exists, and the rates or tariffs are distorted or unable to function freely, and the public is adversely affected.72

The Guidelines

The Guidelines are based on country experiences and international best practices.73 Country experiences include those of the ASEAN member states that already have comprehensive competition laws.74 On the other hand, the Deputy Secretary General of the ASEAN has referred to the practices of the European Union and the United States as among the jurisdictions with many decades of competition regulation, operational experiences and institutional memories of the ASEAN.75

Although not binding, the Guidelines serve as a common reference for ASEAN member states in introducing competition policy.76 The Guidelines set forth the objectives of competition policy, which each ASEAN member state may pursue taking into account its own national competition policy needs. The objectives include:

  • the protection of competition which, in turn, contributes to economic efficiency, economic development and consumer welfare;77
  • the monitoring and control of the private sector to ensure that private monopolies do not simply replace public monopolies;78 and
  • complementing trade policy, industrial policy and regulatory reform.79

To achieve the foregoing objectives, one or more competition regulatory bodies may be established.80 Member states may choose to establish stand-alone independent authorities, create different authorities or retain competition regulatory functions within relevant government departments or ministries.

As a matter of scope, the Guidelines provide that national competition policies may include the prohibition of anti-competitive agreements;81 abuses of dominant position; anti-competitive mergers; and restrictive trade practices. ASEAN member states may also include concerted practices in the prohibitions.82

While certain agreements may have the effect of restricting the freedom of parties, this does not necessarily mean that they are anti-competitive. Accordingly, the Guidelines recommend that ASEAN member states evaluate the agreement with reference to its object and/or effects where possible. However, ASEAN member states may also consider identifying certain ‘hard-core restrictions’ that should be considered as per se illegal for ‘having an appreciable adverse effect on competition.’83These may include bid rigging, price
fixing and market sharing.84 Apart from these hard-core restrictions, ASEAN member states may opt to analyse agreements using the ‘rule of reason’ and ‘safe harbour provisions’.85

ASEAN member states should also consider prohibiting abuses of a dominant position.86 They may provide an illustrative list of such conduct, such as:

  • exploitative behaviour towards consumers;
  • exclusionary behaviour towards competitors;
  • discriminatory behaviour; and
  • limiting production, markets or technical development to the prejudice of consumers.87

In determining when an entity is dominant, a member state may indicate a market share threshold test in its competition law.88

As regards mergers, ASEAN member states ‘may consider prohibiting [those] that lead to a substantial lessening of competition or would significantly impede effective competition in the relevant market or in a substantial part of it.’89 To weed out mergers that may have no significant impact, competition policies may indicate that only those mergers above a given threshold shall or may be notified to and approved by a regulatory body.90

However, competition policies may establish certain exemptions aimed at specific industries or activities depending on the objectives of an ASEAN member state.91 For instance, small and medium enterprises may be deemed excluded ‘from the application of competition law, in order to enhance their competitiveness in the market’ and help improve their ability to compete with larger companies.92

The Guidelines likewise provide for provisions on the establishment of a competition regulatory body,93 enforcement of competition law,94 due process95 and international cooperation.96

Proposals for Philippine Compliance with the Guidelines

The following bills containing proposals for antitrust legislation have been filed during the present 16th Congress, in either the House of Representatives or in the Senate:

  • House Bill No. 388;97
  • House Bill No. 453;98
  • House Bill No. 1133;99
  • Senate Bill No. 41;100
  • Senate Bill No. 473;101
  • Senate Bill No. 1027;102
  • Senate Bill No. 1210;103
  • Senate Bill No. 1293;104 and
  • Senate Bill No. 1453.105

Most of the pending Congressional bills have common provisions, such as:

  • the establishment of a Philippine Fair Competition Commission or an equivalent centralised and specialised regulatory body tasked with the enforcement of competition laws;
  • the inclusion of prohibited acts deemed to be anti-competitive, particularly:
    • anti-competitive agreements and/or conduct;
    • abuse of dominant position; and
    • anti-competitive mergers;
  • the establishment of higher administrative and criminal fines and penalties.

In proposing to prohibit acts and establish a competition regulatory body to enforce competition laws, the pending bills are mostly compliant with the Guidelines, except with regard to anti-competitive agreements. In many of the bills, price fixing106 and bid rigging107 are deemed anti-competitive agreements and/or conduct if they are concluded with the purpose and effect of creating a monopoly or cartel or lessening competition.108 The bills appear to determine the existence of anti-competitive agreements using the so-called rule of reason. However, the Guidelines have recognised that price fixing and bid rigging are hard-core restrictions that should be deemed illegal per se. Indeed, there is now a broad consensus that bid rigging, as a hard core cartel, is one of the ‘most egregious of antitrust law violations’.109 It is often characterised as illegal per se because these acts rarely have any pro-competitive benefits.110 Thus, we believe Philippine competition law should have a similar characterisation of bid rigging.

The Guidelines likewise indicate that market sharing111 and limiting or controlling production or investment112 are agreements which should be deemed illegal per se. While most of the bills include a prohibition against market sharing and/or limiting or controlling production or investment,113 they are not deemed illegal per se. In some bills, these are generally deemed abusive conduct only if the agreements are concluded with the purpose and effect of creating a monopoly or a cartel, or lessening competition. Accordingly, we believe that the enacted Philippine competition law should likewise specifically state that these agreements prohibited they are deemed illegal per se.

In addition, while most of the pending bills provide an illustrative list of acts that are deemed abuses of dominant position,114 it is unclear if the abuse of buying power is contemplated. At most, price discrimination is included among conduct indicating abuse of dominant position, which can be committed in either the supply or purchase of goods of like grade and quality. If coupled with the purpose and effect of creating a monopoly or cartel or substantially lessening competition, then agreements or conduct resulting in price discrimination are deemed to be abusive of dominant position. Only one bill specifically includes monopsony115 as conduct constituting abuse of dominant position.

In this regard, abuse of market power provisions may be drafted to include abuse of buyer power (ie, the ability of a firm, or a group of firms acting jointly, to decrease and profitably maintain prices below the level that would prevail under competition).116 Large enterprises may create buying power that squeezes farmers/other small players and transfers a larger part of the value chain to such enterprises. A way to avoid this may be to define the abuse of buyer power as constituting abuse of dominance. Thus, while the Guidelines do not specifically require the inclusion of abuse of buying power, the Philippines should include a provision similar to monopsony so that smaller suppliers are protected when they deal with larger, dominant enterprises.

Predatory behaviour towards competitors is deemed by most of the bills as an abuse of dominant position.117 However, consumers may equally be victims of predatory pricing. A dominant player’s ability to recoup its losses after below-cost pricing may be regarded as proof that such pricing was abusive in nature.118 Thus, in instances where the intent to drive competitors out of the market or create barriers to entry is not readily seen, Philippine competition law may regard recoupment of losses by a dominant player after cutting prices as proof of predatory pricing, in abuse of its dominant position.

As regards anti-competitive mergers, most of the pending bills prohibit mergers if the effect is to substantially lessen competition or tend to create a monopoly.119 However, the Philippine Fair Competition Commission (or another centralised/specialised competition agency) should be allowed to also impose public interest conditions in approving or disapproving mergers in the same manner as in other developing countries with similar non-competition goals in their competition laws. For example, in South Africa, a merger may be stopped or allowed on purely public interest grounds, as when the merger may have an adverse effect on employment and hence on public interest.120 Thus, even where the merger is not anti-competitive, public interest should be allowed to trump the lack of anti-competitive effect of the merger. However, no anti-competitive merger should be allowed just because it promotes public interest.

Finally, the Guidelines provide that certain groups may be excluded from the application of the competition law. Given the history of the Philippines, it needs an antitrust law that would promote public interest, particularly promoting the market performance of SMEs (which will be chosen on the basis of some performance standards set by the authorities and their likelihood to innovate and succeed in the relevant sector). To better their performance in competition, the bills should exclude farmers’ groups, cooperatives or similar associations, and SMEs from the application of the competition law. Additionally, cooperation agreements in the field of research for upgrading or improving the living standards of society at large may also be excluded.

Conclusion

In summary, apart from what has already been provided in the bills, the following should also be considered in formulating a comprehensive antitrust or competition law:

  • price fixing and bid rigging should be considered illegal per se;
  • market sharing and limiting or controlling production or investment should be considered as anti-competitive agreements and/or conduct and likewise be deemed illegal per se;
  • abuse of buying power should be considered as an abuse of dominant position;
  • as regards predatory pricing, it would be good policy for the Philippines to require proof of recoupment. In instances where prices have been lowered but the intent to drive competitors out of the market or create barriers to entry is not readily seen, a finding of predatory pricing can still be made in case recoupment by the dominant player is proven;
  • the central competition authority created under the law should be permitted to impose public interest as an additional condition to the approval or disapproval of mergers; and
  • to encourage competition, SMEs, farmers’ groups, cooperatives or similar associations, as well as agreements in the field of research for upgrading or improving the living standards of society at large, may be excluded from the application of the competition law.

Philippine history has shown that the country’s wealth has often been concentrated in the hands of a few. Thus, the suggestions here are aimed at ensuring that the enacted Philippine competition law will not only be compliant with the Guidelines, but will also effectively ensure that even small players are given a fighting chance to compete in the Philippine market and succeed.

Notes

  1. ASEAN Economic Blueprint, available at www.asean.org/87-10.pdf (last accessed on 6 January 2014).
  2. Guidelines (2010), available at www.asean.org/archive/publications/ASEANRegionalGudelinesonCompetitionPolicy.pdf (last accessed on 6 January 2014), article 1.1.1.
  3. Dr Lawan Thanadsillapaku, Open Regionalism and Deeper Integration: The Implementation of ASEAN Investment Area (AIA) and ASEAN Free Trade Area (AFTA), available at www.thailawforum.com/articles/lawanasean.html (last accessed on 6 January 2014).
  4. This term is being used by ASEAN to refer to both laws and regulations, on the one hand, and public policies and general government directions aimed at introducing, increasing and/or maintaining competition, on the other hand (see Guidelines, article 2.1.2).
  5. Foreword to the Guidelines.
  6. President Benigno Simeon C Aquino III, State of the Nation Address (26 July 2010).
  7. House Bill No. 1133, Explanatory Note.
  8. Antitrust Bill Among Economic Measures to Occupy 16th Congress, Belmonte, available at newsinfo.inquirer.net/424519/anti-trust-bill-among-economic-measures-to-occupy-16th-congress-belmonte (last accessed 6 January 2014).
  9. For a history of the Philippines, please read Teodoro Agoncillo, History of the Filipino People (8th edition, 1990).
  10. Id.
  11. Tristan Catindig, The ASEAN Competition Law Project: The Philippines Report (2001), available at www.jftc.go.jp/eacpf/02/philippines_r.pdf (last accessed on 6 January 2014).
  12. Id.
  13. Economy of the Philippines, available at www.princeton.edu/~achaney/tmve/wiki100k/docs/Economy_of_the_Philippines.html (last accessed 6 January 2014). A market economy is one wherein the price of goods and services are determined by supply and demand. As a mixed market economy, the Philippines is said to be a country ‘with free enterprise and some government interference in businesses’ (see also philippines12345.weebly.com/economy.html (last accessed 9 December 2013)); see also infra note 32. The Supreme Court has remarked that while free enterprise as a policy is enshrined in the Constitution, government has the power to intervene when necessary to promote the general welfare (see Association of Philippine Coconut Desiccators v Philippine Coconut Authority, GR No. 110526, 10 February 1998). This can be seen from the government’s price regulation in highly regulated industries such as telecommunications, energy, and public utilities.
  14. Anthony Abad, ‘Recommendations for Philippine Antitrust Policy and Regulation’ (paper presented during the Asia-Europe Meeting Trust Fund conference, 27–28 June 2005).
  15. Philippine Constitution, article II, section 1.
  16. See, eg, ‘The Correspondents Takes on Local Political Dynasties’, available at www.abs-cbnnews.com/tv-current-affairs/01/25/10/correspondents-takes-local-political-dynasties%C2%A0 (last accessed 6 January 2014).
  17. See Emmanuel A Cruz, ‘The Development of a Philippine Comprehensive Competition Policy and Law (Difficulties Encountered)’, available at www.jftc.go.jp/eacpf/05/APECTrainingProgramAugust2004/philippines.cruz.pdf (last accessed on 6 January 2014). This report says these members of Congress are threatened by the enactment of a comprehensive competition policy/law and therefore resist its passage.
  18. Anthony Abad, ‘Updates on the Proposed Philippine Antitrust/Competition Legislation’ (presentation during the 2009 Annual Asian Competition Law Conference, 7 December 2009).
  19. BTI Country Report 2 (2010). See also Cesar Saldana, ‘The Philippines’, in Corporate Governance and Finance in East Asia, 155, 179 (2001). On page 155, Saldana says:
    The total sales of these groups in 1997 were estimated at P806 billion. Family-based groups have larger companies since their total sales were about 33.4 percent of the top 1,000 corporations’ sales, but they comprised only 23.8 percent of total companies in number. All major industries were represented, suggesting that business groups are common in all major markets. Some 20 financial institutions were affiliated with these groups, including 16 commercial banks. This is significant considering that there were only 31 local commercial banks in the country in 1997.
  20. ‘Philippines’ Elite Swallow Country’s New Wealth’, available at http://business.inquirer.net/110413/philippines-elite-swallow-countrys-new-wealth (last accessed 6 January 2014).
  21. See Rafaelita M Aldaba, ‘Assessing Competition in Philippine Markets’ 15, 21, 63 (2008) (discussion paper, on file with the Philippine Institute for Development Studies); Asian Development Bank, ‘Philippines: Critical Development Constraints’ 22 (2007).
  22. Aldaba, supra at 15, Table 13.
  23. BTI World Report, supra.
  24. WEF Global Competitiveness Report (2013–2014).
  25. BTI World Report,supra; see also id.
  26. WEF Global Competitiveness Report (2013–2014).
  27. Executive Order No. 45, section 1 (2011) (EO 45). The DOJ is not a specialised agency specifically constituted to enforce competition law in the Philippines. The DOJ is the government’s main prosecutorial agency for crimes and felonies. It appears that the DOJ was designated as a Competition Authority pursuant mainly to its general mandate to enforce the law and investigate and prosecute any person violating the laws.
  28. Philippine Constitution (1987).
  29. See, eg, Anglo-Fil Trading Corporation et al v Lazaro et al, G.R. No.L-54958, 2 September 1983; Tatad v Secretary of the Department of Energy, GR No 127867, 5 November 1997.
  30. See, eg, Anglo-Fil Trading Corporation et al v Lazaro et al, and Tatad v Secretary of the Department of Energy, supra. In Tatad, the Court cited Black’s Law Dictionary for its definitions of ‘monopoly’ and ‘combination in restraint of trade’.
  31. See, eg, Ollendorf v Abrahamson, GR No. 13228, 13 September 1918; G Martini (Ltd) v Glaiserman, GR No. 13699, 12 November 1918.
  32. Act No. 3815 (1932).
  33. See the official website of the Philippine Tariff Commission, Competition Law and Website, available at www.tariffcommission.gov.ph/competit.html (last accessed 6 January 2014).
  34. Article 185 of the RPC criminalises ‘[a]ny person who shall solicit any gift or promise as a consideration for refraining from taking part in any public auction, and any person who shall attempt to cause bidders to stay away from an action by threats, gifts, promises, or any other artifice, with intent to cause the reduction of the price of the thing auctioned’.
  35. Ramon C Aquino, The Revised Penal Code Volume Two, 313 (1992).
  36. Act No. 3247 was repealed and superseded by the RPC. The RPC is largely of Spanish origin.
  37. See DOJ Secretary Opinion No. 019, s. 1962, 26 February 1962. The provenance of article 186’s third paragraph is unclear.
  38. Under articles 3 and 4 of the RPC, criminal liability shall be incurred by, among other persons, any person committing a felony. Felonies are committed not only be means of deceit but also by means of fault; there is deceit when the act is performed with deliberate intent.
  39. Catindig, supra.
  40. Id.
  41. US v Fulgueras, GR No 2176. 18 April 1905.
  42. No. L-45911, 11 April 1979.
  43. GMA News Online, ‘DOJ Files First Ever “Cartel Case” in PHL vs Party-list Solon, 8 Others’, available at www.gmanetwork.com/news/story/237495/news/nation/doj-files-first-ever-cartel-case-in-phl-vs-party-list-solon-8-others (last accessed 6 January 2014). We are not aware of the status of this case, as the DOJ has declined to provide information.
  44. Republic Act No. 386, as amended (1949).
  45. Republic Act No. 7581 (1992). (RA 7581).
  46. A cartel is defined as any combination of or agreement between two or more persons engaged in the production, manufacture, processing, storage, supply, distribution, marketing, sale or disposition of any basic necessity or prime commodity designed to artificially and unreasonably increase or manipulate its price. Section 5 of RA 7581 considers cartelisation together with hoarding and manipulation as Illegal Acts of Price Manipulation.
  47. Under section 11(a) of the Oil Deregulation Act, cartelization means ‘any agreement, combination or concerted action by refiners, importers and/or dealers, or their representatives, to fix prices, restrict outputs or divide markets, either by products or by areas, or allocate markets, either by products or by areas, in restraint of trade or free competition, including any contractual stipulation which prescribes pricing levels and profit margins.’
  48. Under section 11(b) of the Oil Deregulation Act predatory pricing means:
    selling or offering to sell any oil product at a price below the seller’s or offeror’s average variable cost for the purpose of destroying competition, eliminating a competitor or discouraging a potential competitor from entering the market: Provided, however, That pricing below average variable cost in order to match the lower price of the competitor and not for the purpose of destroying competition shall not be deemed predatory pricing. For purposes of this provision, ‘variable cost’ as distinguished from ‘fixed cost’, refers to costs such as utilities or raw materials, which vary as the output increases or decreases and ‘average variable cost’ refers to the sum of all variable costs divided by the number of units of outputs.
  49. Republic Act No. 9502 (2008).
  50. Republic Act No. 7394 (1992) (RA 7394).
  51. Id. article 50. An act or practice shall be deemed deceptive whenever the producer, manufacturer, supplier or seller, through concealment, false representation of fraudulent manipulation, induces a consumer to enter into a sales or lease transaction of any consumer product or service.
  52. Id. article 52. An act or practice shall be deemed unfair or unconscionable whenever the producer, manufacturer, distributor, supplier or seller, by taking advantage of the consumer’s physical or mental infirmity, ignorance, illiteracy, lack of time or the general conditions of the environment or surroundings, induces the consumer to enter into a sales or lease transaction grossly inimical to the interests of the consumer or grossly one-sided in favour of the producer, manufacturer, distributor, supplier or seller.
  53. Republic Act No. 8293 (1998).
  54. Id. Section 4.2 defines technology transfer arrangements as:
    contracts or agreements involving the transfer of systematic knowledge for the manufacture of a product, the application of a process, or rendering of a service including management contracts; and the transfer, assignment or licensing of all forms of intellectual property rights, including licensing of computer software except computer software developed for mass market.
  55. IPC, section 88. One such mandatory provision is section 88.2 which states that ‘[c]ontinued access to improvements in techniques and processes related to technology shall be made available during the period of the technology transfer agreement’.
  56. IPC, section 87. Some of the prohibited clauses which are deemed anti-competitive include:
    •     87.2: those pursuant to which the licensor reserves the right to fix the sale or resale prices of the products manufactured on the basis of the licence;
    •     87.3: those that contain restrictions regarding the volume and structure of production;
    •     87.4: those that prohibit the use of competitive technologies in a non-exclusive technology transfer agreement;
    •     87.5: those that establish a full or partial purchase option in favour of the licensor;
    •     87.6: those that obligate the licensee to transfer for free to the licensor the inventions or improvements that may be obtained through the use of the licensed technology; and
    •     87.15: other clauses with equivalent effects.
  57. 57  See IPC, section 85
  58. Corporation Code, Section 79.
  59. EO 45, section 1.
  60. DOJ Department Order No. 844, 10 October 2011.
  61. See EO 45, Whereas Clauses.
  62. DTI, Bureau of Trade Regulation and Consumer Protection, available at www.dti.gov.ph/dti/index.php?p=181 (last accessed 6 January 2014).
  63. Republic Act No. 7394, title III, chapter 1 (1992).
  64. See RA 7581, section 3(a) to 3(c). The DTI’s responsibility relates to basic necessities not within the responsibility of the other implementing agencies under the Price Act (ie, the Department of Agriculture, the Department of Health and the Department of Environment and Natural Resources).
  65. RA 7581, section 3 (3(d)).
  66. Oil Deregulation Act, section 13, 14(d); See also Implementing Rules and Regulations of the Oil Deregulation Act, section 17.
  67. Republic Act No. 9136 (2001).
  68. Id, at section 43.
  69. ERC Competition Rules and Complaint Procedures (2004), available at www.erc.gov.ph/admin/UploadFiles/Documents/Competition%20rules%20and%20complaint%20procedures%209_5_06.pdf (last accessed on 6 January 2014).
  70. RA 8791, section 4.
  71. Circular No. 237 (2000).
  72. Republic Act No. 7925 (1995).
  73. Foreword to Guidelines.
  74. These are Indonesia, Malaysia, Singapore, Thailand and Vietnam.
  75. Opening Remarks by HE S Pushpanathan, DSG of ASEAN for AEC, at the ASEAN Experts Group on Competition First Business Forum, Handbook on Competition Policy and Law in ASEAN for Business, Singapore, 3 November 2010.
  76. Preface to Guidelines.
  77. Guidelines, article 2.2.1.
  78. Guidelines, article 2.2.2.
  79. Guidelines, article 2.2.4.
  80. Guidelines, article 2.3.1.
  81. Includes horizontal and vertical agreements.
  82. Guidelines, article 3.2.5.
  83. Guidelines, article 3.2.2.
  84. Guidelines, article 3.2.2.
  85. Guidelines, article 3.2.3.
  86. Guidelines, article 3.3.1.
  87. Guidelines, article 3.3.2.
  88. Guidelines, article 3.3.1.1.
  89. Guidelines, article 3.4.1.
  90. Guidelines, article 3.4.3.
  91. Guidelines, article 3.5.
  92. Guidelines, article 3.5.5.
  93. Guidelines, chapter 4.
  94. Guidelines, chapter 6.
  95. Guidelines, chapter 7. The Guidelines state that procedures should be transparent, certain, accountable and not unduly burdensome or prohibitive.
  96. Guidelines, chapter 10. The Guidelines provide that the overarching objective of a cooperative competition policy arrangement for the ASEAN member states is the promotion of market integration in relation to the objective of establishing a common market by 2015. In this regard, ASEAN member states will endeavour to develop a regional platform or understanding or arrangement or build on the AEGC to facilitate co-operation between competition regulatory bodies (see article 10.3.1).
  97. An Act Penalising Anti-Competitive Agreements, Abuse of Dominant Position, and Anti-Competitive Mergers, Establishing the Philippine Fair Competition Commission and Appropriating Funds Therefor, and for Other Purposes.
  98. An Act Penalising Anti-Competitive Agreements, Abuse of Dominant Position, and Anti-Competitive Mergers, Establishing the Philippine Fair Competition Commission and Appropriating Funds Therefor, and for Other Purposes.
  99. An Act Penalising Anti-Competitive Conduct, Abuse of Dominant Position, and Anti-Competitive Mergers, Establishing the Philippine Fair Competition Commission and Appropriating Funds Therefor, and for Other Purposes.
  100. An Act Creating the Fair Trade Commission, Prescribing its Powers and Functions in Regulating Trade Competition and Monopolies and for Other Purposes.
  101. An Act to Implement the Competition Policy Under the Constitution, Strengthen the Prohibition Against Abuse of Monopoly Power of Dominant Position, Prevent Cartels, Combination in Restraint of Trade and Other Anticompetitive Practices and Conduct and for Other Purposes.
  102. An Act Promoting Competition to Protect Consumer Welfare, Advance Domestic and International Trade and Sustained Economic Development By, Among Others, Regulating Monopolies, Anti-Competitive Agreements, Abuse of Dominant Power, and Anti-Competitive Mergers, Establishing the Philippines Fair Competition Commission and Appropriating Funds Therefor, and for Other Purposes.
  103. An Act Prohibiting Anti-Competitive Practices and Creating the Competition Regulatory Commission.
  104. An Act Penalising Anti-Competitive Conduct, Abuse of Dominance, and Anti Competitive Mergers, Establishing for the Purpose an Office for Competition Under the Department of Justice, Appropriating Funds Therefor, and For Other Purposes.
  105. An Act Penalising Anti-Competitive Agreements, Abuse of Dominant Position, Anti-Competitive Mergers, Establishing the Philippine Fair Competition Commission.
  106. Most of the bills define the price fixing as:
    [a]ny agreement among competitors to raise, suppress, fix or otherwise maintain the price at which their goods and services are sold such as, but not limited to, establishing or adhering to price discounts, holding prices firmly, eliminating or reducing discounts, adopting a standard or formula for computing prices, maintaining certain price differentials between different types, sizes or quantities of products, adhering to a minimum fee or schedule and other analogous schemes with the purpose and effect of creating a monopoly of cartel or lessening competition.
  107. Bid rigging is commonly defined in the bills as:
    [a]ny agreement to fix prices at auctions or in any other form of bidding, with the purpose and effect of creating a monopoly or cartel, or lessening competition such as, but not limited to, cover bidding, bid suppression, bid rotation and market allocation and other analogous practices of bid manipulation.
  108. See for example, HB 388, section 8; HB 453, section 8; HB 1133, section 8; SB 473, section 5; SB 1027, section 8; SB 1293, section 8; SB 1453, section 8.
  109. See ‘OECD Roundtable on Prosecuting Cartels without Direct Evidence of Agreement: Contribution from United States’, available at www.oecd.org/daf/competition/prosecutionandlawenforcement/35892784.pdf (last accessed on 6 January 2014).
  110. See ‘OECD-Korea Regional Centre for Competition Regional Antitrust Workshop On Bid Rigging and Buyer Power’ (seminar paper) (Seoul, 14–16 June 2006), available at webcache.googleusercontent.com/search?q=cache:MVW3wE-7y-sJ:www.oecd.org/dataoecd/3/11/36253453.pdf+&cd=1&hl=en&ct=clnk (last accessed on 6 January 2014).
  111. The Guidelines define market sharing as ‘involv[ing] agreements to share markets, whether by territory, type or size of customer, or in some other ways’ (see article 3.2.2.3).
  112. This has been defined under the Guidelines as ‘agreements which limit output or control production, by fixing production levels or setting quotas, or agreements which deal with structural overcapacity or coordinate future investment plans’ (see the Guidelines, article 3.2.2.4).
  113. See for example, SB 473, section 5; SB 41, section 6; SB 1293, section 8. In many of the following bills, market sharing and/or limiting or controlling production or investment is deemed as an abuse of dominant position: see HB 388, section 9; HB 453, section 9; HB 1133, section 9; SB 1027, section 9; SB 1453, section 9; SB 473, section 6.
  114. See for example, HB 388, section 9; HB 453, section 9; HB 1133, section 9; SB 473, section 6; SB 1027, section 9; SB 1293, section 9; SB 1453, section 9.
  115. Monopsony is defined in section 6(b) of SB 473 as an:
    arrangement or a practice [where] sellers, producers, service providers are compelled to accept payment below market price, whether in the form of cash, credit or any other consideration, in exchange for their goods and services. This shall also include an arrangement where the firm with dominant position or its related entities will provide credit to the sellers, producers, and service providers only if they agree to sell at below market price and/or sell all of their products and render all of their services to the firm in possession of dominant position, the creditor, or to any person designated by them.
  116. UNCTAD Secretariat, ‘The Cocoa Study: Industry Structures and Competition’ (2008), available at r0.unctad.org/infocomm/Studies/Cocoa_Study_2008.htm (last accessed on 6 January 2014).
  117. HB 453, section 9(a); SB 1133, section 9(a); HBB 388, section 9(a); SB 473, section 6(b); SB 1027, section 9(a); SB 1453, section 9(a). It provides that any agreement, including but not limited to, selling goods at below relevant cost with the with the intent of driving competitors out of the market, or creating barriers to entry is deemed an abuse of dominant position.
  118. See Matsushita Electric Industrial Co v Zenith Radio Corp, 475 US 574 (1986); Brooke Group Ltd v Brown & Williamson Tobacco Corp, 509 U.S. 209 (1993). In the US, proof of recoupment is a precondition to a finding of predatory pricing.
  119. HB 1133, section 10; HB 453, section 10; HB 388, section 10; SB 41, section 13; SB 473, section 7; SB 1027, section 10; SB 1210, article 3, section 8; SB 1293, section 10; SB 1453, section 10.
  120. In the Large Merger between Harmony Gold Mining Company Limited and Gold Fields Limited, Case No. 93/LM/NOV04 (2005).

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