Philippines: Overview

The Philippines is a member of the Association of Southeast Asian Nations (ASEAN), which agreed to establish an ASEAN Economic Community by 2015. On 20 November 2007, ASEAN adopted an Economic Blueprint, which aims to transform ASEAN into a highly competitive region. In line with this, the ASEAN Regional Guidelines on Competition Policy (Regional Guidelines) were formulated in 2010.¹

One objective of the Regional Guidelines is the enactment by each ASEAN member state of a competition policy by 2015.² Five of the 10 ASEAN Member States (ie, Indonesia, Thailand, Singapore, Vietnam and Malaysia) have currently enacted a comprehensive competition policy and law.³

The Philippines has yet to enact a comprehensive competition statute that would reflect its compliance with the Regional Guidelines and replace the country’s fragmented competition laws. However, the Philippines has made recent strides in this endeavour. On 15 December 2014, the Philippine Senate approved Senate Bill No. 2282 (SB 2282), its proposed Philippine Fair Competition Act.⁴ Although the other chamber of the Philippine Congress (ie, the House of Representatives) must also approve the proposed law (which will thereafter be sent to the president of the Philippines for approval), the senate’s approval is nonetheless a significant development in the years-long quest to enact a comprehensive Philippine competition law.

SB 2282 provides for the establishment of a Fair Competition Commission (FCC), which is envisioned to be the Philippines’ principal competition authority. This article examines the proposed FCC under SB 2282, particularly in light of the Regional Guidelines.

Current Philippine competition regulatory bodies

At present, there are almost as many Philippine regulators with competition mandates as there are Philippine competition laws, which are scattered among the Revised Penal Code (RPC) (the country’s principal criminal statute) and various sector-specific issuances. For instance, aside from the Philippine Constitution,⁵ the Philippines’ competition laws include:

• the RPC, whose article 186 penalises combinations in restraint of trade and unlawful monopolisation; its article 185 also prohibits machinations in public auctions;⁶
• section 5 of the Price Act (Republic Act No. 7581),⁷ which prohibits cartelisation (ie, agreements designed to artificially and unreasonably increase or manipulate prices of basic necessities and prime commodities);
• section 11 of the Downstream Oil Industry Deregulation Act (Republic Act No. 8479),⁸ which prohibits cartelisation and predatory pricing in the downstream oil industry;
• section 24 of the Cheaper Medicines Act (Republic Act No. 9502),⁹ which prohibits cartelisation and acts in restraint of trade in medicines;
• articles 50 and 52 of the Consumer Act (Republic Act No. 7394),¹⁰ which prohibits deceptive and unfair or unconscionable acts or practices;
• part II, chapter IX of the Intellectual Property Code of the Philippines (Republic Act No. 8293) (IP Code),¹¹ which requires the inclusion of certain mandatory provisions and the exclusion of prohibited provisions in technology transfer agreements; and
• section 45 of the Electric Power Industry Reform Act (Republic Act No. 9136)¹² (EPIRA), which prohibits market power abuse or anti-competitive or discriminatory acts or behaviour by electric power industry participants.

The foregoing laws are enforced by various government agencies and regulators.

The Department of Justice

The Department of Justice (DoJ) is currently the Philippines’ foremost competition law authority, and the Philippine government’s principal legal counsel and main prosecutorial arm.¹³ It is tasked with the investigation and prosecution of crimes in the Philippines in general.

As early as 1964 (through Republic Act No. 4152), the DoJ was given the task of:

• studying all laws relating to trusts, monopolies and combinations;
• drafting such legislation as may be necessary to update or revise existing laws to enable the government to deal more effectively with monopolistic practices and all forms of trusts and combi­nation in restraint of trade or free competition, or tending to bring about non-competitive prices of articles of prime necessity;
• investigating all cases involving violations of such laws; and
• initiating and taking such preventive or remedial measures, including appropriate judicial proceedings, to prevent or restrain monopolisation and allied practices or activities of trusts, monopolies and combinations.

Accordingly, anti-competition crimes, such as those in articles 185 and 186 of the RPC and cartelisation under the Price Act and the Cheaper Medicines Act, are within the DoJ’s jurisdiction to investigate and prosecute.

Pursuant to the foregoing, and recognising the ‘need to promote competition and level the playing field in the market’, in 2011, the president of the Philippines issued Executive Order No. 45, designating the DoJ as the country’s Competition Authority empowered to, among others, investigate and prosecute cases of violations of competition laws and enforce competition policies for the protection of consumers.¹⁴ Subsequently, the DoJ established its Office for Competition (OFC).¹⁵

The OFC is an extension of the DoJ’s investigatory and prosecutorial mandate. This is clear from the OFC’s March 2013 guidelines on the implementation of Executive Order No. 45, which mainly set forth the process to be followed for its investi­gations of alleged anti-competitive conduct and subsequent potential prosecution thereof. But the OFC appears to also have become proactive across various industries by dabbling in policy-making and not confining itself to investigations. For example:

• the OFC issued Advisory Opinion No. 2 (series of 2014), warning telecommunications companies not to mislead or deceive their subscribers with so-called unlimited internet packages that are eventually throttled down upon reaching a certain volume of data bits;¹⁶
• on 9 December 2014, the OFC held the first National Competition Conference, which was envisioned to be a platform for competition advocacy and a venue to discuss the most relevant competition issues in the country.¹⁷ The OFC also hosted the ASEAN Competition Conference in 2014;
• the OFC has conducted a study jointly with the Philippine Ports Authority on the operation of harbour pilots in the country’s ports. The OFC identified the following competition-related issues:
  • monopolisation of pilotage services due to exclusive privilege granted to the harbour pilots association;
  •  lack of transparency in harbour pilots’ transactions; and
  •  on-compliance of harbour pilots with the prescribed rates and services;¹⁸ and
• in 2014, the OFC and the Securities and Exchange Commission (SEC) entered into a memorandum of agreement for guidelines on merger regulation.¹⁹ Under the Corporation Code, mergers (where the corporate personality of one of the corporations is maintained) and consolidations (where a new corporation is formed and the consolidated corporations cease to exist) of corporations must be approved by the SEC.²⁰ Pursuant to the foregoing memorandum of agreement, all applications for approvals of mergers and consolidations must be forwarded to the OFC for evaluation and determination of the existence of any anti-competitive features.

Neither the OFC nor the DoJ itself has the power to impose criminal or other fines and penalties. The imposition of criminal fines and penalties, as well as the award of civil damages, is a matter for the regular courts. On the other hand, administrative penalties are usually within the jurisdiction of the relevant duly-empowered regulatory agencies. The DoJ and the OFC are not authorised to issue cease-and-desist orders or injunctions against alleged violations of competition laws.

The Department of Trade and Industry

The Department of Trade and Industry (DTI) – mainly under its Consumer Protection and Advocacy Bureau – ‘functions as a policy-making body and oversees the advocacy of trade and consumer protection laws’.²¹ The DTI is the primary implementing agency of the Price Act.²² Accordingly, the DTI can conduct investigations for violations of the Price Act and, if warranted,²³ may impose administrative fines and other penalties (such as cease-and-desist orders and even closures of establishments). Further, the DTI is empowered to initiate civil actions and initiate the prosecution of criminal violations of the Price Act with the regular courts.²⁴

The Securities and Exchange Commission

The SEC is the Philippine government agency with general jurisdiction and supervision over all corporations, partnerships or associations who are the grantees of primary franchises, licenses and permits issued by the Philippine government. As mentioned, the SEC must approve mergers and consolidations of corporations.²⁵ In case of a merger or consolidation of entities subject to sector-specific regulators such as banks, insurance companies, public utilities and other corporations governed by special laws, the favourable recommendation of the appropriate government agency must first be obtained. When the SEC is satisfied that the merger or consolidation is not inconsistent with the Corporation Code and existing laws, it shall issue a certificate of merger or of consolidation, as the case may be, at which time the merger or consolidation shall be effective.²⁶

Other sector or industry-specific regulators

The Joint Task Force of the DoJ and Department of Energy (DoE)

The task force oversees the downstream oil industry to ensure fair competition and prevent cartelisation and monopolies to prevent an unreasonable rise in the price of petroleum products.²⁷ Its powers are primarily investigative. The task force has the power to direct criminal prosecutors of the DoJ to institute the appropriate actions before the courts to restrain or enjoin and prosecute acts that constitute cartelisation and predatory pricing.²⁸ The task force may, however, file the appropriate complaints with the courts.²⁹ The task force does not have the power to impose fines and penalties for acts in violation of the Oil Deregulation Act.

The Energy Regulatory Commission (ERC)

The ERC is the principal regulatory body for the Philippine electric power industry. Among its tasks is to monitor and penalise abuse of market power, cartelisation, and anti-competitive or discriminatory behaviour by any participant of the electric power industry³⁰ The ERC has issued competition rules which relate to the identifi­cation and investigation of anti-competitive behaviour.³¹

If the ERC finds that an industry participant has engaged in anti-­competitive behaviour, it may impose remedies to stop and redress such acts, including the imposition of price controls, issuance of injunctions, requirement for divestment or disgorgement of excess profits, and imposition of fines and penalties.³²

The Bangko Sentral ng Pilipinas (BSP)

The BSP (the Philippines’ Central Bank) is the principal regulator of the Philippine banking industry.³³ Pursuant to the foregoing mandate, the BSP issued Circular No. 237, series of 2000,³⁴ which consolidates all rules and regulations on mergers and consolidations of banks and other financial institutions.³⁵ The BSP may consider whether a ‘merger or consolidation will result in a more viable financial institution as a result of cost savings and improved competitive position.’³⁶

The National Telecommunications Commission (NTC)

The NTC, as the primary regulator for the Philippines tele­communications industry, is tasked with protecting consumers against the misuse of a telecommunications entity’s monopoly or quasi-monopolistic powers by investigating complaints and exacting compliance with service standards from such entity.³⁷ The NTC may regulate rates when ruinous competition results or when a monopoly or a cartel or combination in restraint of free competition exists, the rates or tariffs are distorted or unable to function freely and the public is adversely affected.³⁸

The Intellectual Property Office (IPO)

The IPO’s director of legal affairs may grant a licence to exploit a patented invention where a judicial or administrative body has determined that the manner of exploitation by the owner of the patent or his licensee is anti-competitive.³⁹

Competition regulatory bodies under the Regional Guidelines

The Regional Guidelines recognise that ‘the objectives of competition policy can be achieved through the setting up of one or more competition regulatory bodies’.⁴⁰ ASEAN members may determine which of the following would be most appropriate for their country:

• establishing a stand-alone independent statutory authority responsible for competition policy and administration and enforcement;
• creating different statutory authorities respectively responsible for competition policy administration and enforcement within specific sectors; or
• retaining competition regulatory functions within the relevant government department or ministry.⁴¹

The Regional Guidelines recommend that competition regulatory bodies be empowered to undertake responsibilities such as:

• issuing regulations and interpretative measures;
• disseminating guidelines on competition policy;
• carrying out educational activities and undertake market competition studies and publish regular reports;
• investigating anti-competitive activities;
• carrying out sector inquiries;
• enforcing penalties and issuing orders and interim measures;
• interpreting competition law provisions and setting legal precedents in relation to competition policy;
• establishing processes to receive and assess notification for exemptions from competition policy and law or notifications for assessment of mergers;
• advising on amendments to and review of competition law and policy and related regulations;
• promoting the exchange of non-confidential information with other competition regulatory bodies, and in the international fora; and
• promoting capacity building with other competition regulatory bodies.⁴²

The Regional Guidelines also advise ASEAN members to ‘grant a competition regulatory body as much administrative independence as necessary and as possible, in order to avoid political influence’.⁴³ The Regional Guidelines also suggest that the budget of the compe­tition regulatory body should be ‘free from political considerations.’⁴⁴

The Regional Guidelines recognise highly regulated industries that are already subject to significant competition policy. For instance, the Regional Guidelines allow exemptions from a national competition policy in industries already subject to sectoral regulation.⁴⁵ The Regional Guidelines, however, suggest the enactment of concurrent legislation to serve as the dominating or ‘overarching template for pro-competitive regulation’.⁴⁶ In addition, the Regional Guidelines recommend the establishment of a regular inter-agency forum or platform that will allow the competition regulatory body, sector-specific regulators and relevant stakeholders to work together and ‘help reduce the incidence of conflict between regulators as well as the costs of “forum shopping”’.⁴⁷ This platform can ensure the coordination of, and the sharing of best practices and expertise between, the regulatory body and sector-specific regulators.⁴⁸

The FCC under SB 2282

The Regional Guidelines in relation to the OFC

The Regional Guidelines do not actually require the creation of a completely new competition body; competition regulatory functions may be retained in existing relevant government bodies. That said, an ASEAN member’s competition regulatory body should be able to perform the recommended responsibilities as set forth in the guidelines, foremost of which are the enforcement and interpret­ation of competition laws; the investigation of alleged competition law violations; and participation in the formulation of and education as regards competition policy and law. Moreover, the Regional Guidelines’ recommendation of independence for the competition regulatory body is important.

As mentioned, the DoJ, through the OFC, is currently the Philippines’ main competition regulatory body. The agency’s current powers, however, do not make it an effective competition authority based on the standards and recommendations of the Regional Guidelines. To illustrate:

• the OFC is primarily an investigative and prosecutorial body. However, its enforcement power is compromised by its lack of power to impose administrative fines and penalties. Moreover, the OFC has no authority to impose interim measures such as cease and desist orders against unlawful conduct;
• the OFC may request the assistance and cooperation of sector-specific regulatory bodies in performing its tasks, and has entered into memoranda of agreement with agencies such as the SEC, but there is no statutory platform or requirement for their coordination;
• the OFC may issue advisories, and the DoJ may issue opinions, but neither has any binding rule-making power; and
• neither the DoJ nor the OFC can be considered an independent body. The DoJ secretary and the head of the OFC (currently an assistant secretary of the DoJ) are under the Executive Department, which is headed by the president. Consequently, they are both subject to the president’s power of control.⁴⁹ Indeed, inasmuch as the DoJ secretary is considered a member of the president’s Cabinet, she is considered an ‘alter ego’ of the president.⁵⁰ Further, as with other Cabinet members, the DoJ secretary (as well as undersecretaries and assistant secretaries) serve at the pleasure of the president.

Thus, legislation is necessary in order to establish a Philippine competition regulatory body that will conform to the Regional Guidelines’ standards and recommendations for such. It is in this context that the proposed FCC in the recently approved SB 2282 will be examined.

Independence of the proposed FCC

Similar to other regulatory bodies such as the ERC, the proposed FCC is characterised as an independent quasi-judicial agency.⁵¹

The proposed FCC is to be an attached agency under the Office of the President.⁵² Such attachment is for programme and policy coordination, and does not mean that the proposed FCC would be subject to the president’s supervision and control.⁵³ Thus, the attachment alone should not compromise the proposed FCC’s independence.

The members of the proposed FCC (ie, one chairperson and four commissioners) are to be appointed by the president of the Philippines.⁵⁴ To bolster the proposed FCC’s independence, its members have security of tenure; that is, they do not serve at the pleasure of the president. The commissioners of the proposed FCC are to hold office for one seven-year term (no reappointment) and may only be removed for just cause as provided by law.

Congressional confirmation or approval of the proposed FCC members’ appointments is not necessary. The proposed FCC, however, cannot be independent of dealings with the Philippine Congress. To begin with, the proposed FCC’s mandate, and the proposed Fair Competition Act itself, are legislative issuances that Congress may amend. The legislature may expand or diminish the proposed FCC’s powers at any time. Moreover, although the Regional Guidelines recommend that the budget of the competition regulatory body be ‘free from political considerations’,⁵⁵ this is impossible in the Philippine legal framework. Under the Philippine Constitution (the primordial law of the country), Congress holds the so-called power of the purse. The appropriation of public funds and the formulation of budgets are principally legislative processes; indeed, all appropriation bills must originate from the House of Representatives.⁵⁶ Thus, the proposed FCC has no choice but to depend on Congress for its budgetary requirements and appropriations.⁵⁷

As regards the judiciary, SB 2282 prohibits courts from issuing injunctions against the proposed FCC’s exercise of its duties and functions. As an exception, the Court of Appeals and Supreme Court may do so when the matter is of extreme urgency involving a constitutional issue and will result in grave injustice and irreparable injury to the public.⁵⁸ The proposed FCC’s rulings, orders and decisions are made appealable to the Court of Appeals,⁵⁹ but the proposed FCC’s decisions are immediately executory unless restrained by the Court of Appeals. At any rate, under the Philippine Constitution, courts may review any alleged grave abuse of discretion amounting to lack or excess of jurisdiction by any branch or instrumentality of the government.⁶⁰

Similar to commissioners of other government agencies, the proposed FCC’s commissioners are disqualified from holding any other office or employment and are prohibited from practising their professions (except teaching), participating in business or being financially interested in any contract with government.⁶¹ The proposed FCC’s commissioners must strictly avoid conflict of interest in the conduct of their office.⁶² After the expiration of their term, commissioners of the proposed FCC are not allowed to run for any elective position in government in the immediately succeeding elections, and are not allowed to appear or practice before the proposed FCC for two years following cessation from office.⁶³

Powers of the proposed FCC

Quasi-judicial power, investigation and prosecution

The proposed FCC’s principal mandate would be to promote competition, ensure consumer welfare and penalise abuses of market power.

The proposed FCC will have jurisdiction over cases involving violations of the Fair Competition Act and other existing competition laws.⁶⁴ As an agency with quasi-judicial powers, the proposed FCC will be vested with power to:

• adjudicate on the rights of persons;
• hear and determine questions of fact;
• weigh evidence and draw conclusions from such facts; and
• make binding determinations in accordance with law.⁶⁵

The proposed FCC may initiate an inquiry (or case) motu proprio, upon the filing of a verified complaint by an interested party or upon referral by a concerned regulatory agency.⁶⁶ The proposed FCC may issue subpoenas for documents and testimony of persons and summon witnesses.⁶⁷ The wilful failure to comply with a subpoena without just cause, as well as, for example, refusing to answer questions or furnish information when legally required to do so,⁶⁸ is deemed contemptuous conduct which may be summarily punished by the proposed FCC.⁶⁹ The contempt power, together with the FCC’s injunction and other interim remedy powers, and in turn, the general inability of courts to issue injunctions against it, should strengthen the FCC’s enforcement capabilities.

The proposed FCC may determine the relevant market in the disposition of anti-competitive conduct cases based on factors affecting the substitutability of goods or services constituting such market and the geographic area delineating the boundaries of the market.⁷⁰

As part of the proposed FCC’s adjudicatory powers, it may issue or undertake the following (whose details will be threshed out in the proposed Fair Competition Act’s implementing rules and regulations):

Nolo contendere resolution

A person or entity whose business is the subject of an inquiry may submit a nolo contendere resolution at any time before the resolution of the inquiry by paying an certain amount as penalty and agreeing to submit compliance reports as may be directed by the FCC.⁷¹

Request for a binding ruling

An entity which is unsure of whether an act, course of conduct, agreement or practice is compliant with competition law may request for the proposed FCC to render a binding ruling on such act, conduct, agreement or practice. In the event of an adverse ruling, the applicant shall be given a reasonable period within which to comply with competition laws and shall not be subject to criminal liability unless he thereafter fails to comply.⁷²

Proposal for consent judgment

At any time prior to the issuance of a binding ruling, the promulgation of a cease-and-desist order or the promulgation of a decision of judgment in any administrative, civil or criminal case, the entity whose business conduct is under inquiry may, without any admission of anti-competitive behaviour, submit a written proposal to the proposed FCC for the entry of a consent judgement.⁷³

Consultations

Prior to the request for a binding ruling or the proposal for a consent judgment, the concerned entity may communicate with the proposed FCC on such matters that should be included or excluded in such request or proposal.⁷⁴

Inspections

The proposed FCC may conduct inspections of business premises and other offices where it is reasonably suspected that books, tax records or other documents relevant to an investigation are kept.⁷⁵ However, the proposed FCC may do so only ‘upon an order of [a] court’.⁷⁶ Such an order may be in the form of, say, a search warrant. The requirement for a court order would prevent the proposed FCC from conducting dawn raids undertaken in other jurisdictions. However, this is necessary in light of article III, section 2 of the Philippine Constitution, which allows searches and seizures only upon order of a court and upon a finding of probable cause.

Sanctions and other administrative fines and penalties

If after due notice and a hearing the proposed FCC finds that an entity has entered into an anti-competitive agreement or abused its dominant position, the proposed FCC may stop or redress such acts through temporary price controls, injunctions and orders for the disgorgement of excess profits.⁷⁷ The proposed FCC may likewise direct what SB 2282 considers ‘structural remedies’ such as adjustment and divestiture orders, provided that there is no equally effective ‘behavioural remedy’ or where a ‘behavioural remedy’ would be more burdensome for the concerned entity.⁷⁸

The proposed FCC is empowered to impose certain administrative fines and and penalties for violations of the proposed Fair Competition Act. The fines imposable by the proposed FCC range from 50 million pesos for the first offence, and up to 200 million pesos for the third offence.⁷⁹ That is a marked increase from current administrative penalties, such as the 1 million peso maximum fine that the DTI may impose under the Price Act for cartelisation.

Similar to other administrative agencies, the proposed FCC will not have the power to adjudicate or impose criminal liability, which may be determined only by the regular courts. Criminal violations of the proposed Fair Competition Act would be punished by imprisonment from two to five years, or a fine ranging from 100 million pesos to 200 million pesos.⁸⁰ That is a substantial increase from current criminal fines under article 186 of the RPC (a 6,000 peso maximum fine)and the Price Act (a 2 million peso maximum fine).⁸¹ The possible imprisonment under SB 2282 is on par with the RPC’s (from six years and one day to 10 years imprisonment for offences involving prime commodities),⁸² but lower than the possible five to 15-year imprisonment under the Price Act.⁸³

If the violation involves the trade or movement of prime commodities such as rice, corn, sugar, chicken, pork, beef, fish or vegetables, then SB 2282 says that the fine imposed by the proposed FCC or the courts shall automatically be tripled.⁸⁴

Exemptions

The proposed FCC may exempt an entity from the enforcement of the Fair Competition Act, upon a written request for forbearance, if the commission determines that competition will not be impeded or enforcement is not necessary to attain the police objectives of the law.⁸⁵ The exemption must be made public and may be conditional or subsequently withdrawn by the proposed FCC.⁸⁶

Merger review

SB 2282 empowers the proposed FCC to review mergers and acquisitions in such markets, in accordance with such factors as the proposed FCC may determine.⁸⁷ The proposed FCC can prohibit the implementation of a merger or acquisition or require modifications or amendments to such agreements if it finds that it will prevent or substantially lessen competition in the relevant market or in the market for substantially related goods or services.⁸⁸ FCC approval will be necessary before a merger or acquisition may take effect and proceed, otherwise such merger or acquisition is voidable and the persons responsible may be penalised.⁸⁹ However, the transaction is deemed approved if the proposed FCC fails to act within 30 days from submission of substantially all requested information.⁹⁰

The proposed FCC’s power to review mergers does not dispense with SEC approval of a merger (or consolidation) under section 79 of the Corporation Code because a merger (or consolidation) will necessarily require an amendment of one or both of the merging (or consolidating) companies’ articles of incorporation. That said, the proposed FCC’s power to review mergers would be greater than the SEC’s. The SEC’s power to review mergers is limited to statutory mergers while the proposed FCC’s power to review mergers encompasses statutory mergers, acquisitions or takeovers, joint ventures and any other transaction whereby one or more undertakings acquire control over one or more undertakings.⁹¹

Quasi-legislative powers

The proposed FCC would have quasi-legislative or rule-making powers. Significantly, the proposed FCC would be authorised to determine from time to time and publish the thresholds for a dominant position, or minimum levels of shareholdings in relevant markets that could give rise to a presumption of a dominant position.⁹² (SB 2282, however, establishes an initial presumption of market dominance if the market share of an entity is at least 50 per cent.)⁹³

Other matters that the proposed FCC can issue rules on include:

• the parameters for the imposition of temporary price controls, issuance of injunctions by the proposed FCC, requirement of divestment and disgorgement of excess profits;⁹⁴
• the parameters for the issuance of adjustment or divestiture orders;⁹⁵ and
• the determination of markets where mergers and acquisitions are subject to its review.⁹⁶ Moreover, the proposed FCC can determine the thresholds for which merger notification will be necessary, as well as the exemptions for that requirement.⁹⁷

Finally, the proposed FCC can revise, as it deems necessary, the implementing rules and regulations of the proposed Fair Competition Act which are to be promulgated by the inter-agency group composed of agencies such as the DoJ, SEC, NTC and ERC.⁹⁸

Civil/private actions

Civil actions by private persons who suffer direct injury, without making a distinction as to the basis for the injury (ie, whether based on law or contract)⁹⁹ are subject to the proposed FCC’s prior investigation and finding that anti-competitive acts were committed.

Advisory opinions

The proposed FCC may issue advisory opinions on competition matters.¹⁰⁰ Normally, however, administrative opinions are not binding on Philippine courts.¹⁰¹

Inter-agency coordination

Under SB 2282, the proposed FCC is granted primary jurisdiction over competition issues.¹⁰² It has the authority to intervene and participate in administrative and regulatory proceedings of other government agencies, which require a consideration of the Fair Competition Act, such as those before the ERC, SEC and NTC.¹⁰³ To ensure consistency in the interpretation and application of competition laws, the proposed FCC is tasked with entering into agreements with different government agencies to harmonise the exercise of their respective jurisdiction. In the absence of an agreement, government agencies that seek to exercise their jurisdiction over a competition-related case must notify the proposed FCC. Should the proposed FCC deem that it is better-equipped to handle the competition-related case, it may issue a counter-notification stating that it has decided to assume jurisdiction over such case and request the technical assistance of such government agency.¹⁰⁴ An entity shall not be subject to multiple exercise of authority over a certain action, omission, agreement or conduct with respect to competition-related controversies.¹⁰⁵

The proposed FCC is empowered to enlist the assistance of any branch, agency or department of government to exercise its powers and comply with its mandate for the prevention of anti-competitive behaviour, detection of violations and prosecution of offenders.¹⁰⁶

SB 2282 does not propose to abolish the OFC. Under SB 2282, the latter will continue to have the authority to investigate and prosecute criminal offenses arising under the Fair Competition Act and other competition laws.¹⁰⁷ However, aside from being divested of its status as the Philippines’ Competition Authority, the OFC may not file a criminal case unless there has been an inquiry conducted and the latter has been endorsed to the DoJ (through the OFC) by the FCC.¹⁰⁸

The proposed FCC: How does it fare?

In general, the proposed FCC under SB 2282 appears to conform to the Regional Guidelines’ suggestions for competition regulatory bodies. The proposed FCC appears to have ample duties and responsibilities, ranging from investigatory, enforcement, prosecutorial, punitive, rule-making and standard-setting powers, as well as coordi­nation with other agencies on competition law matters. Perhaps the Regional Guidelines and SB 2282 diverge as to the independence of the proposed FCC; however, under the current Philippine legal framework, no proposed FCC can be completely independent of the other branches of the Philippine government. As mentioned, the proposed FCC will look to and depend on the Congress mainly for its powers and appropriations; coordinate policies with the president (who also appoints the members of the commission); and be subject to review by the judiciary.

As also mentioned, the Philippine Senate’s approval of SB 2282 is a significant development. That said, inasmuch as the creation of an FCC and the enactment of a comprehensive Philippine competition law have languished for many years under previous bills filed in the Congress, we believe that there is still no assurance that such a law will finally be passed and take effect by 2015. In the meantime, in light of the broad powers that the FCC is expected to wield, its establishment is keenly anticipated.

Notes

1. Available at www.asean.org/archive/publications/ASEANRegionalGudelinesonCompetitionPolicy.pdf (last accessed 18 December 2014).
2. See Regional Guidelines, 1.1.3.
3. See Handbook on Competition Policy and Law in ASEAN for Businesses, available at www.asean.org/resources/item/handbook-on-competition-policy-and-law-in-asean-for-business-2 (last accessed 12 December 2014).
4. We understand that the Philippine House of Representatives has approved at the committee level a counterpart House Bill for the establishment of the Philippine Competition Commission. The House Bill has provisions similar to that of SB 2282 but has yet to be formally passed.
5. Philippine Constitution, article XII, section 19 provides that ‘[t]he State shall regulate or prohibit monopolies when public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.’
6. Act No. 3815 (1932), as amended. Article 185 provides that ‘[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’ shall be punished.
7. 1992.
8. 1998.
9. 2008.
10. 1992.
11. 1998.
12. 2001.
13. Executive Order No. 292 (the Administrative Code of the Philippines), Book IV, Title III, Chapter 1, Sections 1 and 2 (1987).
14. Executive Order No. 45, series of 2011, ‘Designating the Department of Justice as the Competition Authority’, June 9, 2011.
15. See Office for Competition, available at www.doj.gov.ph/office-for-competition.html (last accessed 17 December 2014).
16. A copy of OFC Advisory Opinion No. 2 (Series of 2014) is available at www.doj.gov.ph/news.html?title=DoJ%20to%20telcos:%20%27Unlimited%27%20means%20unlimited&newsid=331 (last accessed 17 December 2014).
17. See President Aquino to keynote 1st National Competition Conference available at www.doj.gov.ph/news.html?title=President%20Aquino%20to%20keynote%201st%20National%20Competition%20Conference&newsid=329 (last accessed 18 December 2014).
18. See ‘DoJ Completes Study on Harbor Pilots’, dated 3 November 2014, available at www.doj.gov.ph/news.html?title=DoJ%20completes%20Study%20on%20Harbor%20Pilots%20in%20Ports&newsid=318#sthash.djw7XrkE.dpuf (last accessed 18 December 2014).
19. See ‘DoJ and SEC establishes merger control regime’, available at www.doj.gov.ph/news.html?title=DoJ%20and%20SEC%20establishes%20merger%20control%20regime&newsid=295 (last accessed 17 December 2014).
20. Corporation Code, section 79.
21. DTI, The Organization, available at www.dti.gov.ph/dti/index.php/about/about-3 (last accessed 17 December 2014).
22. Price Act, section 3(3)(d).
23. See Price Act, sections 10(9)(a) to (d), 10(10).
24. Price Act, sections 10(13).
25. Corporation Code, section 79.
26. Id.
27. Downstream Oil Deregulation Act, section 13, 14(d); see also implementing rules and regulations of the Downstream Oil Deregulation Act, section 17.
28. Id, at section 13.
29. Id, at section 14(d).
30. EPIRA, section 43(k), (o), (p), (s), (t), (u). Under section 4(s) of the EPIRA, industry participants are those persons or entities engaged in the generation, transmission, distribution or supply of electricity.
31. 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 9 December 2013).
32. EPIRA, section 45; see also Competition Rules, Rule 11.
33. Republic Act No. 8791, ‘The General Banking Law of 2000’, section 4, (2000).
34. Dated 19 April 2000.
35. BSP, Mergers and Consolidation, available at www.bsp.gov.ph/regulations/key/mergersandconsolidation.pdf (last accessed 17 December 2014).
36. Circular No. 237, Item 6(ii).
37. Republic Act No. 7925, ‘The Public Telecommunications Policy Act of the Philippines’, Section 5(f) (1995).
38. Republic Act No. 7925, section 17.
39. IP Code, Section 93.3.
40. Regional Guidelines, article 2.3.1.
41. Regional Guidelines, article 4.3.1.
42. Regional Guidelines, article 4.1.2.
43. Regional Guidelines, article 4.3.3.
44. Regional Guidelines, article 4.3.4.
45. Regional Guidelines, article 4.4.1.
46. Regional Guidelines, article 4.4.3.
47. Regional Guidelines, article 4.4.4.
48. Regional Guidelines, Articles 4.4.5.1 and 4.4.5.2.
49. Constitution, article VII, section 17; see Rufino v Endriga, GR No. 139554, 21 July 2006, where the Philippine Supreme Court held that ‘[t]he President’s power of control applies to the acts or decisions of all officers in the Executive branch. This is true whether such officers are appointed by the President or by heads of departments, agencies, commissions, or boards. The power of control means the power to revise or reverse the acts or decisions of a subordinate officer involving the exercise of discretion.’
50. See Secretary of DOTC v Mabalot, GR No. 138200, 27 February 2002.
51. See EPIRA, Section 38 (which recognizes the ERC as a ‘quasi-judicial regulatory body’); see also Metro Constructions, Inc. v Chatham Properties, Inc (GR No. 141897, 24 September 2001), which defines a quasi-judicial agency or body as ‘an organ of government other than a court and other than a legislature, which affects the rights of private parties through either adjudication or rule-making’.
52. SB 2282, chapter II, section 1.
53. See Beja v Court of Appeals, GR No. 97149, 31 March 1992 where the Philippine Supreme Court held that an ‘attached agency has a larger measure of independence from the Department to which it is attached than one which is under departmental supervision and control or administrative supervision’.
54. SB 2282, chapter II, section 2. Under chapter II, section 5 of SB 2282, the compensation and other emoluments of the commissioners would be exempt from the coverage of Republic Act No. 6758, or the ‘Salary Standardization Act’. In this regard, the salaries and other emoluments of the commissioners shall be set based on an objective classification system, taking into consideration the importance and responsibilities attached the respective positions, and shall be submitted to the President for approval.
55. Regional Guidelines, article 4.3.4.
56. Philippine Constitution, article VI, section 24. In general, for civil and criminal disputes, Philippine courts are of four levels: the municipal or metropolitan trial courts; the regional trial courts; the Court of Appeals; and the Supreme Courts.
57. Under the Philippine Constitution, to preserve their independence in relation to Congress, constitutional bodies such as the judiciary and the Civil Service Commission, Commission on Audit and Commission on Elections are expressly given fiscal autonomy and their appropriations must be automatically and regularly released. Moreover, the Constitution prohibits the legislature from reducing appropriations for the judiciary below the amount appropriated for the previous year. An administrative body created by statute (not the Constitution) does not enjoy the foregoing entitlements.
58. SB 2282, chapter VIII, section 2.
59. SB 2282, chapter VII, section 12.
60. Philippine Constitution, article VIII, section 1.
61. SB 2282, chapter II, section 4.
62. Id.
63. Id.
64. SB 2282, chapter II, section 8(c).
65. Dole Philippines v Esteva, GR No. 161115, 30 November 2006.
66. SB 2282, chapter VII, section 1.
67. SB 2282, chapter II, section 8(f).
68. SB 2282, chapter VII, section 10.
69. Id.
70. SB 2282, chapter V, section 2.
71. SB 2282, chapter VII, section 8.
72. SB 2282, chapter VII, section 9(a).
73. SB 2282, chapter VII, section 9(c).
74. SB 2282, chapter VII, section 9(d).
75. SB 2282, chapter II, section 8(g).
76. Id.
77. SB 2282, chapter II, section 8(d).
78. SB 2282, chapter II, section 8(h).
79. SB 2282, chapter VI, section 1(a).
80. SB 2282, chapter VI, section 2.
81. Section 15.
82. Under article 186 of the RPC, imprisonment for unlawful monopolisation and combinations in restraint of trade which do not involve prime commodities ranges from six months and one day to two years and four months.
83. Section 15.
84. SB 2282, chapter VII, section 14.
85. SB 2282, chapter V, section 4.
86. Id.
87. SB 2282, chapter IV, section 1
88. SB 2282, chapter IV, section 5.
89. SB 2282, chapter IV, section 2.
90. Id.
91. See definition of ‘merger’ under section 4(l), chapter 1, SB 2282.
92. SB 2282, chapter V, section 3.
93. SB 2282, chapter V, section 3.
94. SB 2282, chapter II, section 8(d).
95. SB 2282, chapter II, section 8(h).
96. SB 2282, chapter IV, section 1.
97. SB 2282, chapter IV, section 4.
98. SB 2282, chapter IX, section 1.
99. SB 2282, chapter VII, section 15.
100. SB 2282, chapter II, section 8(k).
101. See Koppel (Philippines) Inc v Yatco, GR No. L-47673, 10 October 1946.
102. SB 2282, chapter VII, section 2.
103. SB 2282, chapter II, section 8(l).
104. SB 2282, chapter VII, section 8(l).
105. SB 2282, chapter VII, section 2.
106. SB 2282, chapter VII, section 8 (l).
107. SB 2282, chapter VII, section 9.
108. SB 2282, chapter VII, section 1.