competition policy briefing paper

A Policy Briefing Paper:Competition Policy

A Policy Brie�ing Paper:COMPETITION POLICY

Asian Institute of ManagementAugust 18, 2011

by theCenter for Media Freedom and Responsibility

in partnership with theAsian Institute of Management Policy Center

with a grant from the National Endowment for Democracy

COPYRIGHT ©2011Center for Media Freedom and Responsibility

TABLE OF CONTENTS

Introduction .................................................................................................... 4

Overview and BackgroundCompetition: What Is It All About? .............................................................. 6Competition Policy: Why Does It Matter? ................................................... 9Time for Anti-Trust ...................................................................................... 11

Tracking the LegislationCompetition Policy Issues in the Countries of Asia: The Philippines ....................................................................... 15Existing Philippine Competition Laws and Pending Legislation .................................................................................................... 17Focus on Senate Bills ................................................................................. 20

Multisectoral PerspectivesCompetition Experience in the Philippines: Cement Cartel ......................................................................................................................... 25Philippines: Competition Law, Policy Hope to Curb Monopolies, Cartels ................................................................... 34Journalism and Competition ....................................................................... 37

Conclusion and Recommendations ............................................................ 41

CMFR Media Forum on Competition PolicySpeakers ................................................................................................................................... 42 Participants ............................................................................................................................. 43

Annexes Executive Order No. 45 ...................................................................................... 45 House Bill No. 4835 ............................................................................................ 48Senate Bill No. 1 ................................................................................................. 74

A Policy Briefing Paper: Competition Policy4

INTRODUCTION

This is not the �irst time for the Center for Media Freedom and Responsibility (CMFR) to engage the press in the discussion of policy and its coverage. A CMFR program in the early 2000s initiated roundtable discussions on mining, the environment (The Clean Air Act), federalism and parliamentary government. CMFR also conducted a training program on reporting policy news in 2004.

The aim is to help the media to understand the policy making process which is central to good government.

These efforts show the dif�iculty of promoting policy news as a critical part of the news agenda. The conventions of journalism focus on reporting events. The policy process is often left unreported, unless the debates of proponents gain in con�lict and color as when policy divisions become sharp and become controversial. When this happens, the coverage relies on the exchange of quotes and soundbites.

The policy process is always relevant or signi�icant as the outcome affects the public. But it is not easy to make policy news interesting. But it is actually more important to provide news about the process before legislation is past and policy is cast in stone. The time to engage the public is when the policy is still being debated, to make sure citizens understand the pros and cons, the gains and losses involved in policy decisions.

In this series of policy forums, CMFR took up freedom of information (FOI), presenting the different versions of the bill being discussed in the executive department as well as in the 15th Congress. This program was supported by a grant from the National Endowment for Democracy and in partnership with the Asian Institute of Management Policy Center (APC) headed by Dr. Ronald Mendoza.

The second forum focused on competition policy and the concern for fair competition and trade, a huge and highly complex subject. This brie�ing paper includes discussions and analyses from experts who have been involved in studies and reports on various aspects of competition policy, just as the discussion was designed to give the media and the public an overview and background on the issues involved in competition and to consider the practical impact of competition on the public. The forum also presented the relevant bills �iled in Congress.

CMFR also reviewed the recent coverage of the issues which touch on competition policy. Most of the reports took up stories re�lecting developments in a sector:

1) The oil price disparities, along with the review and critique of the rise in oil/fuel prices;2) The “Open Skies” Policy; and

A Policy Briefing Paper: Competition Policy 5

3) Telecommunications and the acquisition by Philippine Long Distance Telephone Company, Inc. (PLDT) of controlling shares in Digitel Corp. which operates Sun Cellular. (Given the critical place of Short Message Service (SMS)/texting technology in public life, it is not surprising that the developments in this �ield have been given more space in the business news.)

It is understandable that the interest in one particular aspect of trade be driven by the importance of a particular trade sector. So shifts in oil prices and yes, the price of texting, are well reported.

In general, however, the public does not understand how the price of a product can be affected by fair or unfair competition. Because public interest is involved, the media must make sure that there is enough coverage of the full course of competition policy. We hope that this becomes the subject of more talk shows and public affairs programs.

The current legislation in Congress covers all sectoral concerns, rationalizing fairness in trade in a way that will bene�it the consumer and foster economic ef�iciency as well as continued economic growth.

So far, the bills now pending in Congress on competition policy and Executive Order No. 45�making the Department of Justice the deciding authority on competition issues such as monopolies, cartels, and trusts�have received scant notice in the media. (Please see Annexes.)

There has been an accumulation of competition legislation since the 1980s. There are in fact anti-trust and fair trade components in various laws, government rules and regulations. But with the combined weights of both Asia-Paci�ic Economic Cooperation (APEC) and Association of Southeast Asian Nations (ASEAN) bearing down on the country’s framework for trade, current legislation may go further, at least in terms of public attention if not in actual passage.

The forum also hoped to clarify issues so as to enable the media to better explain them: to give the efforts to broaden competition some traction in the public forum. The purpose then of the policy news program is to make these developments understandable to the media, and, through the media, the ordinary man and woman.

CMFR’s partnership with APC draws on the research and expertise of the public policy think-tank about the subject. It was also our purpose to broaden the media discussion with the participation of the academe, government, and business communities as well as civil society organizations.

MELINDA QUINTOS DE JESUSExecutive Director

Center for Media Freedom and Responsibility


Competition policy is a “fashionable” topic these days, and many developing countries and economies in transition are into drafting competition laws. But what exactly is competition law and policy and why does a country need it? Is trade liberalization not enough to ensure competition? Would competition not lead to cutthroat rivalry that eventually results in the death of domestic �irms and the dominance of large �irms?

Before one answers these questions, however, one �irst needs to understand the concept of competition as explained in the sidebar.

It is important to recognize that high levels of market concentration as well as the presence of monopolies (a type of industrial structure where there is only one large �irm) or oligopolies (where there are a few large �irms) are not necessarily detrimental to competition. Large �irms may achieve a dominant position in the market through legitimate ways like innovation, superior production or distribution methods, or greater entrepreneurial skills. For as long as markets remain contestable wherein entry into a market is easy, one can expect large �irms in an oligopolistic environment to act independently or monopolies to behave in a competitive manner.

One may ask: how can there be competitive prices if there is only one �irm or only a few

�irms in the market? The answer is that if entry is easy and costless, the potential threat from imports or domestic competitors will make the incumbent �irms behave competitively. For instance, as soon as one �irm or a group of �irms attempts to increase prices of lower quality from the competitive levels, a new �irm can come in to serve the market, thereby driving prices back to competitive levels.

Barriers to competition

Competition, however, can be lessened sig-ni�icantly by structural characteristics, re-strictive business practices, and government regulatory policies, examples of which are shown in Box 1. These act as barriers to en-try. Economies of scale is an example of a structural barrier. When there are increasing returns to scale, there is a minimum size that �irms have to attain if they are to have their average cost as low as possible. If the mini-mum ef�icient scale is so large that only one �irm can serve the entire market, there will be a monopoly as in the cases of public utili-ties like the distribution of water, electricity, and piped gas.

Cartel arrangements and mergers that limit competition, meanwhile, are examples of behavioral characteristics or restrictive business practices whereas anti-dumping and investment licensing, among others, are regulatory barriers.

OVERVIEW AND BACKGROUND

Competition: What is it all about?Rafaelita M. AldabaPhilippine Institute for Development Studies


Market power and abuse of dominance

The presence of barriers to entry impedes competition and allows �irms to acquire and exercise market power. Market power in turn enables �irms, unilaterally (in the case of a monopoly) or in collusion with oth-ers (as in cartels), to pro�itably raise prices and maintain these over a signi�icant peri-od of time without competitive response by other existing or potential �irms. Mar-ket power gives rise to reduced output, higher prices and poorer quality products which harm consumers and other produc-ers. Thus, economic welfare is adversely affected.

For instance, with cartels and collusion, the economic freedom of consumers and po-tential rivals is taken away. Cartels make

consumers believe that what they see are independent offers. By raising prices and re-stricting supply, however, they deliberately create arti�icial shortages, resulting in goods and services becoming completely unavail-able to some buyers and unnecessarily ex-pensive for others. These output restrictions cause inef�iciency, reduce productivity, result in economic and social harm, and hinder de-velopment.

Large �irms may further take advantage of their market power by abusing their domi-nant position or monopolization. They may suppress competition by restricting or fore-closing the entry of smaller rivals through, for example, the increase of the competitors’ costs of entering a market or the charging of predatory prices which harms the competi-tive process.

Box 1: Structural, behavioral, and regulatory barriers to entry

Structural: barriers due solely to condi� ons outside the control of market par� cipants� Sunk costs – costs that a fi rm cannot avoid by withdrawing from the market; they are a sort

of entry fee� Absolute cost advantage – access to natural resource or human resources� Economies of scale – unit cost of produc� on falls with increasing output� Large capital requirements� Network industries – fi rms that are compe� tors share some cri� cal facility like transporta� on

and telecommunica� ons

Behavioral: represent abuse of dominant posi� on where “rela� vely large” fi rms engage in an� -compe� � ve conduct or restric� ve business prac� ces by preven� ng entry or forcing exit of compe� tors through various kinds of monopolis� c conduct� Excess capacity� Product diff eren� a� on and adver� sing� Horizontal restraints – cartels or collusion (price-fi xing agreements, market sharing territorial

arrangements, bid rigging), price discrimina� on� Ver� cal restraints – resale price maintenance, exclusive dealing� Foreclosure and exclusion� Tac� cs to increase rivals’ costs


Regulatory: barriers imposed by government policies� Special permits, license to operate� Regula� ons infl uencing the use of some inputs� Tariff s, quotas, and other nontariff barriers� An� -dumping and countervailing du� es� Discriminatory export prac� ces� Exclusionary lists� Ownership restric� ons

Source: A Framework for the Design and Implementation of Competition Law and Policy, the World Bank and the Organisation for Economic Co-operation and Development, 1998.

What is competition?

Competition is a process that allows a suf�icient number of producers in the same market or industry to independently offer different ways to satisfy consumer demands. Since competition is often equated with rivalry, it pressures �irms to become ef�icient and offer a wider choice of products and services to consumers at lower prices. A competitive economy enables individuals to exercise economic freedom wherein consumers are able to choose what they value most and entrepreneurs to choose where they want to invest. The competition process allows consumers and producers to make their choices, free of any price �ixing conspiracies and monopolistic bullying. As such, consumer welfare increases, resulting in dynamic ef�iciency through innovation and technological change.


Competition policy and law: Is it necessary?

The goal of competition policy is to preserve and promote competition through the pre-vention of restrictive business practices by �irms and through the correction of inef�icient government regulations. Competition policy seeks to achieve economic ef�iciency to maxi-mize consumer welfare. It is consistent with policies that enhance competition in local and international markets like the liberalized trade policy, relaxed foreign direct investment and ownership requirements, and economic deregulation.

Competition policy includes: (1) policies that enhance competition in domestic and in-ternational markets, and (2) a competition law, also referred to as the anti-monopoly or anti-trust law. Anti-trust law is a clear set of enforceable legal rules applying to commer-cial tactics, behaviour, and transactions by commercial establishments. It is designed to attain the objectives of competition policy. It prohibits �irms from attaining or exercising substantial market power obtained through improper means. In this regard, said law does not prosecute �irms that have gained market power through legitimate behavior, i.e., skill, foresight, and hard work. It is more concerned with the elimination of abusive monopoly conduct, price �ixing and other cartels, and with the prohibition of mergers and acquisi-tions that limit competition. A competition law prevents the setting up of arti�icial barri-ers to entry and helps facilitate market access,

enhance competition and ensure the �low of bene�its to consumers.

After more than 20 years of trade liberalization, there still remains various impediments to entry in Philippine industries that continue to undermine the pro-competitive effects of import competition. While trade liberalization may be a precondition for the growth of a free market, it does not, by itself, guarantee effective competition as outlined in Box 2. Effective competition emerges only if trade reforms are accompanied by the creation of competitive market and industry structures. In the presence of high barriers to entry, it is necessary to design safeguards that would ensure market contestability and regulate anti-competitive business conduct which can damage emerging competition.

The realities and problems

Promoting competition is a big challenge, espe-cially because the bene�its are long- term and do not come without problems. Concerns about opening up the economy too quickly to com-petition are understandable. Domestic �irms that have high costs and other problems fear that they would be wiped out if ef�icient foreign competitors were to enter right away. Small domestic �irms also worry that they would not be able to compete with large business rivals. Competition puts relentless pressure on �irms, foreign or domestic, to cut costs to be more competitive, which often translates into lost jobs. All countries experience social and eco-nomic disruptions when local �irms are unable

9


Competition Policy: Why does it matter?


Box 2: When deregula� on and liberaliza� on are not enough…[Why compe� � on policy is necessary]

� The case of the deregula� on of the telecommunica� ons industry provides a concrete example of what happens when compe� � on rules are vague or lacking. While the entry of new players prompted the Philippine Long Distance Telephone Company, Inc. (PLDT) to launch its zero backlog program in installing more telephone lines and resulted in the introduc� on of a range of telecommunica� ons services as well as price reduc� ons in interna� onal calls, mobile phones, and paging services, the interconnec� on of new players with dominant carrier PLDT was slow and diffi cult. In telecommunica� ons, opportuni� es for compe� � on can be realized only if smooth interconnec� on among various telecommunica� ons services is possible. Since PLDT was able to exert monopoly power over access to networks, it dictated the pace of interconnec� on in the country. Interconnec� on costs were high and resulted in various consumer complaints like unsuccessful call a� empts and irra� onal calling charges.

� The cement industry provides another interes� ng example when price deregula� on and import liberaliza� on are not enough to promote compe� � on. Having a history of a government-sponsored cartel in the industry, a high weight-to-value nature, high transporta� on and handling costs which off er natural protec� on against imports plus the fact that there are no real subs� tutes for cement (lumber is more expensive), the industry was able to engage in tacit price fi xing as it has increased its prices con� nuously since 1999 in a simultaneous manner amidst a situa� on of excess supply, overcapacity, and weak demand.

to compete with foreign or new entrants that have lower costs. The disruption is often high-est in developing countries that lack framework laws and institutions necessary for a well-func-tioning market economy. Competition policy therefore should not and cannot be seen as the answer to every social and economic problem. Other measures such as market retraining and other welfare supports need to accompany competition policy to alleviate dislocations and mitigate the pain of adjustment.

What should we do?

In the face of the challenges, what should we do and what policy direction should we take?

In the last two decades, the Philippines has done substantial economic reforms in terms of deregulation, privatization, and the removal of unreasonable trade barriers. The adoption and enforcement of a transparent competition law and policy is necessary to complement these

reforms. As indicated by the experience of oth-er countries, competition law is the foundation for fostering sustainable competitive markets.

In both Houses of Congress, there are current-ly many proposals for an anti-trust law and regulation and the creation of a Philippine Fair Competition Commission. With some modi�i-cations, the enactment of these laws is the �irst step towards the creation and enforcement of new competition laws in the country.

Competition should be viewed as a means and not an end in itself. While industrial mar-ket structure is an important determinant of business conduct, the policy emphasis should always be on economic ef�iciency rather than on size or market structure alone. It should be on business conduct, market power and keeping markets competitive as well as on disciplining, whenever necessary, exercises of market power that reduce output or in-crease prices.


Singapore’s Lee Kwan Yew once quipped that in the Philippines, 99 percent of the population were waiting for a phone line, while the remaining 1 percent were waiting for a dial tone. While this jab was directed at our telecommunications sector, Lee could have just as easily poked at the rest of our monopolized and highly regulated industries then.

Sweeping market oriented reforms in the mid-1990s were designed to change this. Deregulation and privatization would get the inef�icient and costly government out of key sectors it had no business being in, and instead draw-in competitive, innovative and much more ef�icient private sector actors who would in turn compete for market share by providing better services at lower prices. Deregulation would enhance competition, in turn promoting the necessary investments to boost innovation and competitiveness. This would ultimately lead to increasing consumer welfare and bene�it taxpayers as well, by lowering the number of loss making and inef�icient government controlled corporations.

Are consumers (and taxpayers) really any better off today, well over a decade after this deregulation wave? Did competition and competitiveness really increase? Telecommunica-tions, petroleum, and air travel are three industries that are particularly illustrative of the range of outcomes. There are some gains, but also evidence of emerging challenges to pro-mote competition and safeguard consumer welfare.

Table 1. Summary of Selected Industry Information


Time for anti-trust?Ronald U. MendozaAsian Institute of Management Policy Center

Telecommunications Petroleum AirlinesYear of Deregulation 1995 1998 1995

Companies before Deregulation

PLDT Shell, Petron and Caltex

Philippine Airlines

Companies after Deregulation PLDT (Smart; Talk N’Text-Piltel; Red Mobile-Cure and Sun-Digitel) and Globeb

Shell, Petron, Caltex, SeaOil, Flying V, Total, Jetti, City Oil and UniOil

Philippine Airlines, Cebu Paci�ic, SEAir, Air Philippines, and ZestAir

Her�indahl-Hirschman Competition Indicatora

(Higher values re�lect more market concentration; Date or event in parentheses)

Mobile Telephony:• 10000 (1994)• 4020 (prior to

PLDT-Digitel merger)b

• 5800 (after PLDT-Digitel merger)c

Landlines:• 10000 (1994)• 3253 (prior to


• 4479 (after PLDT-

3427 (1996)d

2846 (2010)d

3427 (1996)d

2846 (2010)d

Domestic• 10000 (1994)• 3680 (2010)International: • 2548 (2010)e



Notes:a Her�indahl-Hirschman Index prior to and after deregulation, with year in parenthesis. The HHI it is the sum of the squared market shares of the each company in the industry. The index approximates the value zero when the industry has more �irms with similar size. A higher value therefore signals potentially weaker competition and more concentration in the industry. For illustration, the US Department of Justice, Federal Trade Commission characterizes an HHI of 1500 and below as “unconcentrated”, 1500-2500 as “moderately concentrated” and 2500 and above as “highly concentrated”. b Shares prior to PLDT-Digitel merger.c Assuming PLDT-Digitel merger.d Data from the Department of Energy.e Data from the Center for Asia Paci�ic Aviation (2010); and based on passenger capacity, including international �lights.

Digitel) and Globeb UniOil ZestAir

Her�indahl-Hirschman Competition Indicatora

(Higher values re�lect more market concentration; Date or event in parentheses)

Mobile Telephony:• 10000 (1994)• 4020 (prior to



Landlines:• 10000 (1994)• 3253 (prior to



Domestic• 10000 (1994)

Telecommunications

The telecommunications industry was de-regulated in the early 1990s, but Philippine Long Distance Telephone Company, Inc. (PLDT) remained a dominant player due to its control over most landlines. This was fur-ther reinforced in 1998, when First Paci�ic (owner of Smart) bought control of PLDT (also owner of Piltel), and these companies accounted for a combined share of 68 per-cent of the cellular telephone subscribers and 43 percent of the installed lines. Compe-tition between PLDT-Smart and Globe kept pricing steady for text messaging, so in real terms (i.e. accounting for in�lation), the price of text messaging declined over time, even as it was kept at PhP1 per text message. In 2003, Sun Cellular of Digital Telecommunications Philippines Inc. (Digitel) entered the mobile telecommunications market offering product innovations like “unli” (unlimited) calls and text messaging. While initially challenged by the industry incumbents through the Nation-al Telecommunications Commission (NTC),

the NTC upheld Sun Cellular’s entry and it eventually provoked similar product innova-tions among the incumbents.

Intense competition among these companies generated a wider array of product options for consumers, with ever more competitive pricing schemes �itting different consumer preferences. Well over 80 percent of the population now has access to mobile tele-phony—a far cry from the times when it took over a decade to get a landline from PLDT.

However, the recent acquisition of Digitel by PLDT raises questions about the state of mar-ket concentration in the industry, and in turn, what this might mean for continued product innovation, competitiveness and consumer welfare. A virtual duopoly will emerge from this deal, with PLDT and its af�iliates account-ing for about 70 percent of the mobile phone market, and Globe serving the remaining 30 percent. Despite deregulation, barriers to en-ter the industry, including separate franchise requirements for each telecommunications


sector and limits to foreign participation (40 percent cap), prevent further enhanced com-petition.

Petroleum

Deregulated in 1998, the downstream oil in-dustry was initially comprised of three play-ers: Caltex Philippines (now the marketing and distributing company under Chevron), Pilpinas Shell, and Petron (then jointly owned by the state-owned Philippine National Oil Company and Saudi Aramco). Today there are several more gasoline suppliers, includ-ing the original three plus SeaOil, Flying V, Total, Jetti, City Oil and UniOil.

Unleaded gasoline was about PhP12 per liter while diesel gasoline was about PhP8 per li-ter during the deregulation—these recently reached peaks of about PhP60 and PhP45 re-spectively. Are these dramatic price increas-es due to deregulation? Recent analysis by the UAP and SGV suggests that, in fact, local pump prices have not gone up as fast as in-ternational indicators for crude oil and its re-�ined products. Further, the stock prices of oil companies such as Petron and Shell do not appear to show any marked improvements during the period of study from 2005-2008, when prices at the pump were on an upward trend.

Our own empirical analysis at AIM also shows that much of the change in gas prices at the pump since the deregulation was accounted for by international price movements. In fact, after correcting for the in�luence of in-ternational prices and a measure of industry competition, gas prices on the margin before and after deregulation are not statistically different. This suggests that while deregula-tion is not to blame for the dramatic rise in

gas prices, it did not seem to change industry pricing either. Indeed, even as they are now also competing in retail, food and shopping options, the three main industry players still dominate—their combined market share still stands at about 77 percent.

Airlines

The civil aviation industry in the Philippines was dominated by Philippine Airlines until the government �inally opened this sector in 1995. Following the entry of new airlines like Cebu Paci�ic, Air Philippines and Asian Spirit (now ZestAir), PAL’s market share was cut in half, declining from 96 percent in 1995 to about 49 percent in 1999. PAL nevertheless remains a dominant player in the market with about 50 percent market share in recent years, but Cebu Paci�ic has captured signi�icant ground, accounting for about 30 percent market share.

Deregulation brought about a surge in do-mestic air travel in the country, thanks to more �lights and more competitive pricing. The Manila-Iloilo route alone experienced an 83 percent increase in the number of travel-ers just two years after deregulation. Passen-gers from Manila to Davao and from Manila to Cebu also shot up by 45 percent and 34 percent respectively during this period.

More attractive pricing clearly played a role in successfully contesting market share from PAL. There is also evidence that PAL restricted output—and this was quickly undone by the entry of more players. A re-cent empirical study suggests that average airfares are about 10 percent lower after liberalization, and that up to 90 percent of domestic airline passengers bene�ited from lower fares.


The industry is not without challenges, how-ever. Competition did improve for the most pro�itable routes, but the less pro�itable routes (or so-called missionary routes) could be left behind. PAL used to serve these routes through a cross-subsidy between the more pro�itable and less pro�itable destinations. However, with the break-up of its monopoly, and the apparent focus of the new entrants on the more pro�itable routes, up to 11 markets formerly served by PAL have lost airline ser-vice.

Airport infrastructure is also still inadequate. In addition, even as new domestic �irms have shown their competitiveness relative to the once monopoly incumbent, there are some concerns that these same �irms may be hard-pressed to compete at the international level, notably once the country opens up to ASEAN competitors as part of the country’s “open skies” policy. Industry experts already fore-cast the Philippines could be a key battle-ground for low cost carriers in the region, in-cluding AirAsia (Malaysia) and Tiger Airways (Singapore) once Philippine skies have been opened up.

Promoting competition and competitiveness

The preceding examples provide some evi-dence of consumer gains from deregulation. However, they also �lag critical issues, includ-ing the possible need to maintain healthy competition levels, and also competitiveness, across Philippine industries. Indeed the indi-cator of competition used widely by interna-tional regulators—the Her�indahl-Hirschman index—suggests that the potential for abuse of market power is still present in all three industries examined here (see table 1). Since the HHI for these industries are well above

2500, according to the guidelines of the US Department of Justice and the Federal Trade Commission, they would all be described as “highly concentrated.”

Some market consolidation has also already begun to take place. Indeed, if we were to draw from guidelines on competition policy presently applied in the United States or in the EU, the PLDT-Digitel merger would automati-cally raise a red �lag and trigger closer scru-tiny by regulatory authorities, as the worsen-ing of industry concentration indicators could indicate a rise in market power and possibly open the door to anti-competitive behavior.

In addition, pricing behavior and product/service strategies remain largely unexamined. Further market liberalization will also intro-duce challenges to some industries. Regula-tory authorities will need to catch up with these developments, utilizing international good practices, including more robust ana-lytical frameworks and technical analyses to strengthen regulatory oversight over these evolving industries.

Deregulation does not mean that the govern-ment should be absent—only that its role be re-focused. Markets can also malfunction, and industries could end up consolidating in ways that undermine competition, innovation and ultimately also competitiveness. It is up to regulatory authorities to facilitate healthy competition and improved competitiveness, in order to safeguard consumer welfare. That in turn requires professional and technically equipped regulatory institutions with true in-dependence and real capacity to exercise their mandate. Given the growing importance of anti-trust issues both nationally and interna-tionally, more effective and coherent competi-tion law and policy will be necessary.


Lawyer Anthony “Tony” Abad, managing di-rector of the Trade Advisory Services (T/A) and lecturer at the Ateneo de Manila Uni-versity Law School, has been an advocate of competition policy since 1993, and empha-sized the importance of the issue.

He said, “If we want a capitalist democracy, we must have a competition policy. It is the foundation of a market economy. If we don’t have it, we will have an economy that is run by a few, bene�its a few, and subsidized by many.”

Basically, competition policy is about having a choice. Competition is not necessarily fair. But it can lead to fairness.

Competition laws and regulations in the Philippines

According to the 1987 Constitution: “The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade and unfair competition shall be allowed.” (Article XII, Section 19)

This mandates Congress to legislate a competition policy.

Anti-trust or competition law is actually not new to the Philippines. Old provisions of US

anti-trust laws, for example, have found their way to the Philippine legal system.

The Philippines was one of the �irst Asian countries to have an anti-trust law: In crimi-nal law, Articles 186 and 187 of the Revised Penal Code [Act no. 3815 (1932)] penalize monopolies and conspiracies or combina-tions in restraint of trade, arti�icial prevention of free competition, and unlawful commerce.

But since 1932, these articles have not been used. We wonder which aspects of this crimi-nal law make it dif�icult or impossible to en-force.

When we are injured by anti-competitive behavior (monopolies or cartels), a civil case may also be filed:

Article 28 of the Civil Code (Republic Act no. 386 [1949]) allows the collection of damages arising from unfair competition.

There are features of competition policy spread around other laws: the Price Act, the Consumer Act, the Corporation Code, the Revised Securities Act, the Intellectual Property Code, and specific sectors. Some aspects of competition policy can also be found in international commitments (World Trade Organization agreements, Association of Southeast Asian Nations

TRACKING THE LEGISLATION

Competition Policy issues in the countries of Asia: the PhilippinesBased on the presentation of Anthony A. Abad of the Ateneo de Manila University School of Law


agreements, bilateral agreements, and oth-er international agreements) and jurispru-dence (“Case law or judicial interpretation is particularly important in de�ining unlaw-ful monopolies, combinations in restraint of trade, and unfair competition practices.”).

But what are the problems that we face? Among them are the fact that competition laws remain unenforced; competition issues are resolved piece-meal and inconsistently (we tend to look at issues by sectors); and there is NO COMPREHENSIVE COMPETI-TION POLICY.

The problem is essentially the political econ-omy of the Philippines (State and Oligarchy in Historical Perspective and Political Arbi-trariness - Weak degree of culpability in the legal & administrative spheres).

The oligarchy has used the powers of the State to create opportunities for themselves to make even more money without having to create social wealth.

The way forward

We need a Comprehensive National Compe-

tition Policy Framework and a Comprehen-sive Competition Law.This will help level the playing �ield:

• Through its allocative, distributive and incentive functions, competition can prevent undue concentration of eco-nomic power and political in the eco-nomic elite.

• Market economy will not only bring higher standards of living but will also have a liberative political effect.

It is also important to note the government’s role which is not to help business people avoid competition by awarding them sub-sidies, protective tariffs, preferential loans, and other economic crutches but to push and challenge national industry to strive, to innovate, and to compete with the best in the world.

Philippine development will have to rely on the play of market forces. Free markets – by nurturing civil society and by imposing their own restraints on the political system – stimulate popular demands for the rule of law and the protection of human rights.


The 1987 Constitution speci�ies the goals of the national economy, which are to promote distributive justice as well as inclusive and sustained, and increasing and expanding productivity.

These are achieved and implemented through policies that promote competition: Indus-trialization and full employment; Providing private enterprises optimum opportunity to develop (Article XII, Section 1); Protection of property rights, where all economic agents have the right to own, establish and operate economic enterprises, subject to distributive justice and the common good (Article XII, Section 6).

When we adopt policies that promote compe-tition, and enact laws that liberalize and de-regulate, there will always be market abuse. So the Constitution also provides protection against anti-competitive behavior:

• Monopolies, regulated or prohibited as public interest requires;

• Combinations in restraint of trade are prohibited; and

• Unfair competition is prohibited (Article XII, Section 19; Article XII, Section 1).

How is competition promoted?

Deregulation/Liberalization/Support forsmall and medium enterprises– Foreign Investments (Republic Act [RA]

7042, as amended by RA 8179) – Banking (RA 8791, and RA 7721) – Telecommunications (RA 7925) – Civil Aviation (Executive Order 219) – Downstream Oil (RA 8479) – Retail Trade (RA 8762) – Electric Power (RA 9136) – Shipping (RA 9295) – Lowering/removal of tariff and non-tariff

barriers to trade – Magna Carta for Small and Medium En-

terprises (RA 6977, RA 8289)

Regulatory barriers to entry– Limitations on ownership – Licensing/franchise

The remedies against unfair competition (Revised Penal Code [RPC], Article 186|RA 3247|Civil Code, Article 28|Tariff and Cus-toms Code, Articles 301 and 302|Intellectual Property Code, Articles 168 to 169|Price Act, Section 5[3]) are criminal, civil, administra-tive, and rate regulation. Prohibited acts in-clude:


Existing Philippine competition laws and pending legislationBased on the presentation of Lai-Lynn Barcenas, associate director of the Asian Institute of Management Policy Center


– Bid-rigging (RPC, Article 185)– Combinations in restraint of trade– Cartelization (RPC, Article 186; RA 8479,

Section 11; RA 7581, Section 5 [3])– Monopoly to restrain free competition– Horizontal agreements (not clear about

vertical agreements)– Price �ixing (RPC, Article 186)– Patent infringement and false represen-

tation of product (IPC 155,168 to 169)– Predatory pricing (RA 8479, Section 11)

There are three ways to regulate competi-tion: criminal (Department of Justice [DOJ] – investigation and prosecution; Regional Trial Courts), civil (Courts of competent jurisdic-tion), and administrative (designated agen-cies, e.g., Energy Regulatory Commission, National Telecommunications Commission, Monetary Board).

Jurisprudence on competition, in general

No criminal action has ever been �iled about competition. However, there have been no-table cases such as:

Intra-corporate action (Gokongwei v. SEC, 1979) – Disallowance of inter-locking directors between competing companies

Challenge against administrative ac-tion – Public utilities regulation, not anti-competitive (Phil. Ports Authority v. Mendoza, 1985)

Constitutional challenge – Predatory pricing pro�itable only if market con-tains signi�icant barriers to entry (Ta-tad v. Secretary of the Department of Energy, et al., 1997)

Executive policy on competition

Under existing laws, the DOJ is the govern-ment legal counsel and advisor as well as the investigator and prosecutor of crimes. Ex-ecutive Order No. 45 (June 9, 2011) expands this mandate:

• Investigate violations of competition laws and prosecute offenders;

• Enforce competition laws and policies;• Supervise competition in markets;• Monitor/implement measures to pro-

mote transparency and accountability in markets;

• Prepare reports on competition for in-dustry and consumer guidance; and

• Promote international cooperation and strengthen Philippine trade relations with other countries.

Is the DOJ capable of implementing these ad-ditional responsibilities?

Pending House bill on competition

The House of Representatives has approved on second reading House Bill (HB) No. 4835 “Philippine Fair Competition Act of 2011” in August 2011. Its salient features include:

• Creation of the Philippine Fair Competi-tion Commission– Makes administrative determination

of violation of the law– Impose �ines and penalties– File criminal complaint before the

DOJ– Monitors competition in the market

• Prohibited Acts– Anti-competitive agreements (hori-

zontal/vertical)


� Price Fixing� Bid Rigging

– Abuse of dominant position� Predatory behavior towards com-

petitors� Limitation and control of markets� Market allocation� Arrangements to share markets or

sources of supply� Price discrimination, with excep-

tions� Exclusivity arrangements� Tie-in arrangements� Boycott

– Anti-competitive mergers

• Fines and Penalties– Administrative:

� Natural person: not less than PhP10M, not more than PhP50M

� Juridical person: not less than PhP250M, not more than PhP750M

� Amount double the gross gain of violators or gross loss of private in-jured party

– Other administrative penalties– Criminal

� Fines, the same amounts as admin-istrative penalties.

� Imprisonment not exceeding 10 years, or

� both �ine and imprisonment� In the alternative, amount double

the gross gain of violators or gross loss of private injured party

Comments and recommendations

We should have a clear and developed policy guide (see Constitution).

The competition authority must be independent. Its members and staff must possess the highest level of skill and expertise, and of proven probity and independence. There must be automatic appropriation for the agency (�inancial independence).

The penalties de�ined in the bills could serve as a disincentive to invest and expand. It also provides opportunities for bribery.

We should consider structural constraints in the market, as well as administrative weaknesses.

We should prioritize administrative actions, strengthen the fact-�inding capabilities of the competition authority, and promote aware-ness through education and information dis-semination during the initial implementa-tion of the law.


When is there no competition?

1. There is a monopoly (except natural mo-nopolies).

2. There is a cartel.

3. There is combination in restraint of trade.

4. There is regulatory capture—a situation when a state regulatory agency created to act in the public interest to regulate a market or industry instead acts in favor of the commercial or special interests of particular �irms it is charged with regu-lating.

Competition policy in the 15th Congress

There are �ive Senate bills (SB) on competi-tion policy pending in the 15th Congress: • SBN 1 “Competition Act of 2011” by Sen.

Juan Ponce Enrile, Antonio F. Trillanes IV and Ralph G. Recto

• SBN 123 “Fair Trade Act of 2011” by Sen. Sergio R. Osmeña III

• SBN 175 “Price Act” by Sen. Trillanes• SBN 358 “Competition Act of 2010” by

Sen. Trillanes• SBN 1838 “Monopolies and Combina-

tions in Restraint of Trade” by Sen. Miri-am Defensor Santiago

The Senate Committees on Trade and Com-merce, and Economic Affairs, chaired by Sen. Manuel B. Villar Jr., are in the process of �inal-izing the Joint Committee Report.

The House of Representatives has approved on second reading House Bill (HB) No. 4835 “The Philippine Fair Competition Act of 2011” in substitution of HB Nos. 549, 913, 1007, 1583, 1733, 1980, 3100, 3134, 3244, 3476, 3534 and 3985.

The Senate version of the bill addresses these major issues:

1. The need for a clear distinction on which prohibitions or prohibited acts are ad-ministrative, civil or criminal.

2. The need to determine the enforcement framework and model for consistency and to obviate any constitutional or legal challenges.

3. The need for a clear evidentiary regime based on prima facie evidence given that competition cases are inherently dif�icult to prove.

4. The control of �irms as a threshold issue given that it is through �irms that control or dominance of the market or relevant markets is done.


Focus on senate billsBased on the presentation of Assistant Secretary Geronimo Sy of the Department of Justice


5. The need to determine the enforcement framework and model for consistency, and to obviate any constitutional or legal chal-lenges.

Key provisions of enhanced SBN 1

The objectives are to:

• Promote and enhance economic ef�iciency and free and fair competition;

• Prevent the concentration of economic power in a few persons; and

• Penalize unfair trade, anti-competitive con-duct and combinations in restraint of trade.

The law:

• Is enforceable within the territory of the Republic of the Philippines;

• Applies to all areas of trade, industry, com-merce and all economic activities including international trade; and

• Covers all �irms as de�ined, and all agents, of�icers, employees, partners, owners, di-rectors, consultants, stockholders, repre-sentatives, managers, supervisors and all other natural persons.

The prohibited acts are:

• Any conduct with the object or effect of preventing, restricting or lessening compe-tition:– Anti-competitive conduct (e.g., price

�ixing, bid rigging)– Abuse of dominance (e.g., predatory

behavior, price discrimination)– Anti-competitive mergers

• Criminalizes any conduct to:– Fix, maintain, increase or control the

price for the supply of goods or services;

– Allocate sales, territories, customers or markets for the production or supply of goods or services; or

– Fix, maintain, control, prevent, lessen or eliminate the production or supply of goods.

• Imposes a �ine up to 10 percent of the an-nual sales or value of the assets of the in-fringed, whichever is higher.

• Provides for the extradition of criminal of-fenders.

Enforcement

• Establishes an Of�ice for Competition (OFC) in the Department of Justice (DOJ) with, among others, the following powers:– Investigate any violation motu proprio

(On its own motion or initiative*), upon the �iling of veri�ied complaint by interested party or upon referral by concerned regulatory agency;

– Issue subpoena duces tecum (A writ by which a person is required to produce documents in evidence*) and ad testi�icandum (A process to compel the attendance of a person in court so that he may give testimony there in.*);

– Undertake on-the-spot inspections of premises;

– Obtain access to books, records or other documents;

– Conduct administrative proceedings;– Issue advisory or legal opinions;– Conduct preliminary inquiry;– Institute civil or criminal proceedings.

• Mandates that the exercise of enforce-ment and regulatory powers by the OFC shall be cumulative to the power and au-thority of regulatory agencies.

* The Philippine Law Dictionary provided the de�initions.


• Provides protection against self-incrimi-nation for any person subject of prelimi-nary inquiry or investigation.

• Excludes privileged communications be-tween lawyer and client from disclosure.

• Provides immunity from suit or leniency, as applicable, to any person or �irm coop-erating with the OFC in the course of in-vestigation.

• Includes administrative sanctions for contempt, failure to comply with orders, and supply of false, misleading or mali-cious information.

• Imposes administrative �ines for commis-sion of prohibited acts.

• Speci�ies the extent of liability of corpo-ration, partnership, association or other entity.

• Res judicata effect of �inal judgment in a civil or criminal action.

• Allows the suspension of administrative, civil or criminal proceedings only upon order of the OFC on proper motion.

• Provides for the institution of private ac-tion (separate and independent civil ac-tion) for the recovery of treble damages and other costs of suit.

• Mandates the creation of a specialized Division of the Court of Appeals to have exclusive jurisdiction over appeals from resolutions of the OFC.

• Prohibits the issuance of temporary re-straining orders, preliminary injunctions

and preliminary mandatory injunctions by courts except the Supreme Court.

Executive action

“…it is the government’s duty to ensure that the market is fair for all. No mo-nopolies, no cartels that kill competi-tion. We need an Anti-trust Law that will give life to these principles…”

President Benigno S. Aquino III in his State of the Nation Address last July 2010

Executive Order (EO) No. 45

“Designating the Department of Jus-tice as the Competition Authority”

The legal basis of EO 45:

“The State shall regulate or prohibit monopolies when public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.” (1987 Philippine Constitu-tion, Article XII, Section 19)

Act No. 3815 (Revised Penal Code)Prohibited Acts

a. Any person who shall enter into any contract or agreement or shall take part in any conspiracy or combination in the form of a trust or otherwise, in restraint of trade or commerce or to prevent by arti�icial means free competition in the market;

b. Any person who shall monopolize any merchandise or object of trade or com-merce, or shall combine with any other person or persons to monopolize and


merchandise or object in order to alter the price thereof by spreading false ru-mors or making use of any other article to restrain free competition in the market; (Article 186)

Republic Act No. 4152 (An Act Amending Sections 1 and 2 of R.A. No. 2705, as amended, titled “An Act Prescribing the Duties and Quali�ications, and Fixing the Number and Salaries of the Members of Legal Staff in the Of�ice of the Secretary of Justice”)

“…to study all laws relating to trusts, monopolies and combinations; to draft such legislation as may be necessary to up-date or revise existing laws to en-able the Government to deal more ef-fectively with monopolistic practices and all forms of trusts and combina-tion in restraint of trade or free com-petition and/or tending to bring about non-competitive prices of articles of prime necessity; to investigate all cas-es involving violations of such laws; and to initiate and take such preven-tive or remedial measures, including appropriate judicial proceedings, to prevent or restrain monopolization and allied practices or activities of trusts, monopolies and combinations.” (Section 2)

Act No. 3247 (An Act to Prohibit Monopolies and Combinations in Restraint of Trade)

“...it shall be the duty of the Attorney-General (now Solicitor General), the Fiscal of the City of Manila and the provincial �iscal, or whoever may act in their stead, to institute proceedings to prevent and restrain such viola-tions.” (Section 4)

Executive Order No. 292 (Administrative Code of 1987)

“It is the declared policy of the State to provide the government with a prin-cipal law agency which shall be both its legal counsel and prosecution arm; administer the criminal justice system in accordance with the accepted pro-cesses thereof consisting in the inves-tigation of the crimes, prosecution of offenders and administration of the correctional system” (Book IV, Title III, Chapter 1)

Additionally, DOJ is the principal agency man-dated to enforce the rule of law and investi-gate and prosecute offenders, and serves as the central authority for matters requiring international legal cooperation.

The functions of the DOJ as Competition Au-thority:

1. Investigate and prosecute all violations of competition laws;

2. Enforce competition policies and laws to protect consumers;

3. Supervise competition in markets and ensure competition laws are adhered to;

4. Monitor and implement measures to pro-mote transparency and accountability in markets;

5. Prepare, publish and disseminate studies and reports on competition; and

6. Promote international cooperation and strengthen Philippine trade relations.

DOJ-Of�ice for Competition

The duties and responsibilities shall be car-ried out by the Of�ice for Competition under the Of�ice of the Secretary of Justice.


The Of�ice shall be manned by such number of staff including legal and technical experts, consultants and resource persons to effec-tively and ef�iciently pursue its mandate.

The OFC in progress

• Association of Southeast Asian Nations (ASEAN)– Hosted the ASEAN Inception Work-

shop on Core Competencies in Com-petition Policy and Law on Aug. 3-4, 2011

– To spearhead future ASEAN conferences on competition in collaboration with GIZ

• European Union (EU) – Participated in a consultation work-

shop with trade and competition stake-holders

– OFC included in TRTA 3 – capacity building component

• Japan International Cooperation Agency (JICA) – Recipient of capacity building program


Cartels: characteristics & how they work

Collusion is the behavior or conduct in which �irms agree to coordinate their actions (set prices or quantities to maximize industry pro�its).

Cartels �ix prices or outputs, rig bids, divide markets by allocating customers, territories, or products & supplies.

Anti-competition behavior create market power, suppress rival and consumer activities.

Arti�icial shortages are created leading to inef-�iciency, reduced productivity, and economic and social harm.

How cartels work:

• Convince all signi�icant competitors to raise prices above competitive level and keep them there;

• Not easy to agree on the price because �irms have different cost structure;

• No members would cheat by lowering prices;

• To be successful, punishment strategy usually in the form of a price war; and

• Firms must be able to keep track of prices & production levels of other �irms in the cartel.

How can a cartel monitor the behavior of its members?

• Trade associations: data collection & dis-semination, police tacit & explicit agree-ments

• Price leadership: dominant �irms an-nounce price changes & other �irms follow

• Other opportunities: newspaper inter-views, articles in trade publications or speeches

Industry characteristics

The product market:

• Homogeneous product• Highly inelastic demand: demand for

product does not change proportionately with a change in its price; price hike in-creases revenue despite fall in quantity

• Few substitutes• Capital-intensive • Heavy user of energy, resource-based

near quarry areas• High transport & handling costs, short

shelf life• Non-tradable product

Industry players are few.

Geographic markets: important in de�ining market shares• Northern and Central Luzon, National

Capital Region, Southern Luzon, Visayas, Mindanao

MULTISECTORAL PERSPECTIVES

Competition experience in the Philippines: Cement cartelBased on the presentation of Rafaelita M. Aldaba of the Philippine Institute for Development Studies


(M – Mergers; A – Acquisitions)

CR4 1987 1990 1996 1997 1998 1999N. Luzon 100 100 100 100 100 100

NCR 100 91 81 87 88 99

S. Luzon 100 100 100 100 100 100

Visayas 100 100 100 100 100 100

Mindanao 100 94 94 100 95 93

HHI 1987 1990 1996 1997 1998 1999N. Luzon 5370 5081 5087 4293 3962 3768

NCR 2676 1547 1727 2008 2213 2163

S. Luzon 10000 10000 10000 10000 10000 4353

Visayas 10000 10000 3977 4086 4318 3587

Mindanao 3199 2701 3120 3174 3011 2617

US guidelines: above 1800 highly concentrated


Main Lessons

Trade liberalization is not a substitute for competition law in industries characterized by: high entry barriers, in-elastic demand, high transport and logistic costs.

• Firms have market power which they are able to exercise

• Weak competition to the detriment of consumers

Without an effective competition law task of prosecuting cartel is difficult: hard evi-dence, will court accept evidence of implic-it cartel, leniency program.

• House hearing, DTI investigation, crimi-nal case (Price Act)

• Prosecution of cartels in countries with effective competition law & policy: EU 248 mil euros 23 cement firms inclg La Farge & Holcim (‘98); Germany price fixing 660 mil euros 6 firms inclg La Farge & Holcim (‘03); Romania 26 mil euros inc La Farge & Holcim (‘05); Tai-wan international cartel NT$210 mil-lion 21 firms incl Cemex

Final Note

Competition as a means and not an end in itself. Focus on economic efficiency rather than on size or market structure alone. The emphasis should be on business conduct and disciplining, whenever neces-sary, the exercise of market power that re-duces output or increase prices.

Not all increases in concentration are in-imical to competition; not all monopolies/oligopolies are inefficient and abusive.

Exercise great care in formulating competition law taking into account industry character-istics but also our institutional endowments, technical capacity, �inancial capability.

WHY CEMENT PRICES REMAIN HIGH DE-SPITE ZERO TARIFFS

Rafaelita M. AldabaPhilippine Institute for Development StudiesJune 2010

Looking at the different economic characteris-tics of cement �irms, this Note argues that the �irms can collectively exert market power. This has resulted in weak competition to the detri-ment of consumers, particularly small users. Hence, even with the government’s recent zero tariff policy on cement imports, cement prices have gone up unabatedly. Without an effective competition law, the country has very little re-course against industry collusion and cartel.

The backdrop

Early this year, Sen. Francis Escudero urged the Department of Trade and Industry (DTI) to explain why cement prices surged to P270 per bag, which is double the price of two years ago (Senate of the Philippines 2010). Consumers have complained that despite the economic slowdown due to the recent global �inancial crisis, cement prices did not drop.

This is in contrast to the report (Osorio 2010) that prices of other construction materials like steel fell by 30–60 percent in 2008 while prices of production inputs like crude fuel dropped from US$140 to $40 per barrel and coal from US$200 to below $100.

In response, the Cement Manufacturers Asso-ciation of the Philippines (CEMAP) announced


last month that price increases are necessary despite sluggish demand because manufactur-ers are seeking to recover high production costs (Ho 2010). Republic, the local associate of La Farge, also announced that it implemented a price hike of P8 per bag in May because of in-creased operating costs (De Vera 2010a). Hol-cim, meanwhile, earlier warned of higher prices in the second quarter due to the power short-age in Mindanao (De Vera 2010b).

History of perennial price increases

In the past ten years, rising cement prices have always been an issue in the country. Both the DTI and the House of Representatives conducted investigations in the early 2000s to look into a possible collusion among mem-bers of the alleged cartel. Given the perennial price increases amid excess supply and weak demand during this period, many analysts suspected that a cartel was at work. The in-dustry association, then known as Philippine

Cement Manufacturers Corporation (Philcem-cor), countered that the price increases were inevitable due to the �irms’ high production costs and �inance charges (Aldaba 2002).

Figure 1 shows the behavior of the average monthly price per cement bag from January 1993 until December 2009. Cement prices increased steadily during the following periods: 1993 to early 1997, January 1999 to December 2001, and from December 2002 onwards. Note that coinciding with the 1997 Asian �inancial crisis, mergers and acquisitions within the industry took place from 1997 to 1998. A continuous drop in cement prices was observed during these years. A safeguard duty of P20.60 per bag on cement imports was also temporarily imposed from November 2001 until the end of 2004. During this time, cement manufacturers agreed with the DTI not to raise prices. Yet, while cement prices brie�ly declined until November 2002, they started to increase unabatedly thereafter.

Figure 1. Cement average monthly prices

Source of basic prices: Department of Trade and Industry, Philcemcor, and NEDA for earlier years in the 1990s.


With mounting calls from various sectors to bring down cement prices, the government temporarily removed tariffs on cement for six months through Executive Order (EO) 766 issued in November 2008. After said EO expired in June 2009, EO 819 extended it for another six months. Prices, however, still remained high. In mid-December 2009, prices in Metro Manila and nearby provinces went up to as high as P260 per bag, from P205 per bag in early December, due to an arti�icial shortage created as the big three cement companies Cemex, La Farge, and Holcim decided to simultaneously shut down their plants in Antipolo and Bulacan for annual maintenance activities.

Like other homogeneous goods such as sugar and �lour, cement is often characterized as a market that is prone to price collusion. Moreover, cement is a type of high weight-to-value product with high transport and handling costs. Hence, it is often classi�ied as a non-traded good. While potential competition from imports is important as a mechanism to control market power and ensure competition, this is of little practical value because of the substantial costs of import entry. Cement can be imported in bulk, but this will entail a bulk handling facility that would require a substantial amount of investment. On the other hand, shipping cement in bags will entail extra handling costs that could easily translate to increases in price. These factors limit the pro-competitive effects of imports on the industry and provide a natural protection against imports.

Note, however, that substantial imports penetrated the country in 2000 at 5 percent tariff as a result of the global excess supply and low prices arising from the Asian �inancial

crisis and in response to the relatively high domestic prices prevailing in the country.

It seems, however, that traders do �ind the business of importing cement too risky and costly. For instance, based on an interview conducted by Isip (2009), the cost of imported cement, including transport and port integration charges, is about P178 per bag. The ex-factory price of locally manufactured cement, on the other hand, is P185 per bag and with mark-up and transport cost of P10 per bag, the retail price is around P205 per bag. Despite this, though, traders consider the price difference between landed cost and ex-factory price as insuf�icient to cover the huge risks involved in the cement import business.

Even at zero tariffs, traders still consider cement importation a high risk business. According to them, it is not viable due to high logistic costs and to the fact that local cement manufacturers have the market power to easily match or underprice imported cement. In the same interview by Isip (2009), she noted that traders are aware that local manufacturers can easily bring down their prices in areas where any shipments come in. Moreover, they know that imported cement can only compete with a small segment of the market composed of small users since local manufacturers have long-term contracts with big customers and contractors wherein they (local manufacturers) provide special discounts for bulk sales.

Cement imports have thus been historical-ly small. Table 1 shows that there were, in fact, only two years when imports as a per-centage of total domestic supply exceeded 10 percent. These were in 2000 (13%) and 2001 (19%).


Traders pointed out that the only way for zero tariffs to have an impact on prices is through owner-supplied importation in areas where port integration charges are cheaper. But doubts abound on whether DTI’s plan of bringing in cement through the Philippine International Trading Cor-poration would be a feasible solution. Is the government ready to pay the high cost of an-other price stabilization scheme?

The Philippines’ recent experience shows that even with the removal of tariffs, compe-tition in the industry has remained weak. In the early 1990s, for instance, cement prices were deregulated, import restrictions were lifted while tariffs were set at a low rate of �ive (5) percent. Yet, the high and rising trend of cement prices seems to indicate that pre-vious trade liberalization and even the more recent tariff elimination are not enough to

ensure that markets would perform ef�icient-ly. The industry has remained highly concen-trated, with three �irms controlling almost 90 percent of the market. Entry barriers are also high because of the large capital require-ments needed to operate a cement plant. Moreover, demand for cement is inelastic* which provides another important source of power to �irms to control prices.

All these characteristics tend to indicate that cement �irms can collectively exert market power and their price behavior seems to show that they are indeed able to exercise it. As such, competition has been limited and has negatively affected consumers, particularly small users. The history of coordination in the industry bolsters the presumption that individual �irms are not acting on their own and are consciously engaged in implicit coordination.

Table 1. Industry statistics (in million 40-kg bags)

Note: Total sales cover domestic sales and exports. Domestic supply is production less exports.

* The price elasticity of demand measures the responsiveness of demand to changes in price. If demand is inelastic (value less than one), a price increase will increase total revenues while if demand is elastic (greater than one), a price increase will decrease revenues (Khemani and Shapiro 1993).


This can be seen in Figure 2 which shows the pricing behavior of the industry, using chang-es in monthly cement prices (expressed in constant terms with 1985=100) from Janu-ary 1993 to December 2010. Cement prices are seasonal; they rise during summer and fall during the rainy months. Notice the near uniformity and symmetric price movements throughout the 16-year period illustrated in the �igure. The threat of a price war and fear that departure from such behavior may lead to costly price cutting, lower pro�it mar-gins, and market instability have prevented �irms from engaging in competition. As Philip Roseburg of La Farge Philippines described their behavior (Ferriols 2001):

In any industry, you can �ight for a big-ger market share but someone has to give up that market share…But ob-viously this wouldn’t work with our competitors here…they will �ight and then we get into a bloody battle where everyone ends up bruised. Given the opportunity, yes, we can try and im-

prove our market share. But I don’t want to lose out in the end and trig-ger another price war…LaFarge has no plans of rocking the boat. We wouldn’t make a run on market share, we want to keep it as stable as possible.

In general, monthly price movements have ranged between -10 and +10 percent except for a few outlier years in 1998, 1999, and 2000. Figure 2 indicates that for the years 1993 and 1994, the highest price changes of around six (6)–seven (7) percent took place during the month of March. From 1995 to 2000, price changes peaked during the month of January registering 11 percent in 1995, six (6) percent in 1996, two (2)–three (3) percent in 1997–1998, and 33 percent in 1999. The latter were merger and crisis years when prices were declining. From 2001 to 2009, the largest price changes were registered in April. These ranged from six (6) to nine (9) percent except in 2002 when cement �irms promised DTI that they would not increase their prices in exchange for the additional duty imposed on cement

Figure 2. Monthly percentage change in cement prices (1985 = 100)

Note: Current prices were de�lated using construction de�lator from the National Income Accounts.


imports.Implication for policy: need for competi-tion law

In countries with strong competition laws, cartels are illegal and are treated toughly. In the Philippines, though, in the absence of a clear, comprehensive, and enforceable com-petition law, the task of prosecuting cartels has been dif�icult. Since the DTI does not di-rectly deal with cartels as a competition issue, it could not penalize anticompetitive behavior.

Since the early 1980s, there have been vari-ous attempts to legislate new competition laws. However, most of these have remained pending, indicating the lack of appreciation and political will to legislate a comprehen-sive competition law for the country. Dur-ing the 11th Congress, there were two House bills that proposed the creation of a fair trade commission. In the Senate, two bills spon-sored by Senators Sergio Osmena III and Juan Ponce Enrile were presented. In the 13th Congress, there were three competition bills �iled by Senators Osmena III, Manuel Villar Jr., and Enrile. In the recent 14th Congress,

the bill of Senator Enrile was able to move and got approved by the Committee. How-ever, the process has since been stalled at the House of Representatives**.

Conclusion

The outcome of cartel behavior is against public interest and highly distortive of eco-nomic ef�iciency. Cartels limit competition and allow �irms to manipulate prices to the detriment of consumers and other industry users, including the government. The experi-ence of the cement industry illustrates that trade liberalization does not automatically lead to competition in the domestic market. Given the characteristics of the industry, in-centives are present for �irms to engage in anticompetitive practices. Thus, removing import restrictions and eliminating tariffs are not enough to ensure competition.

One important lesson is the need to accompany trade reforms with measures to increase com-petition. Without an effective enforcement of competition law, the country has very little re-course against cartels and collusion.

**The Enrile bill aimed to penalize combinations or conspiracies in the restraint of trade and all forms of arti�icial machinations that will destroy, injure, or prevent free market competition. In the House, the Cua bill proposed the creation of a Philippine Fair Trade Commission to investigate, gather evidence, and initiate prosecution of those engaged in unfair trade practices.


References

Aldaba, R.M. 2002. Of cartels and collusion: an analysis of the Philippine cement industry.Chapter 3 in Toward a national competition policy for the Philippines, edited by E. Medalla. Makati City: Philippine Institute for Develop-ment Studies.

De Vera, A. 2010a. Republic Cement hikes prices. Manila Times. 4 May.

______. 2010b. Holcim warns of cement price increase. Manila Times. 26 May.

Ferriols, D. 2001. Special Report: Why ce-ment prices remain high despite in�lux of cheap imports. Philippine Star. 24 February.

Ho, A.L. 2010. Cement price hikes “necessary”— Cemap. Philippine Daily Inquirer. May 31.

Isip, I. 2009. Risky business traders unwilling to import cement despite zero tariff. Malaya. 30 March.

Osorio, M.E.P. 2009. DTI vows to act on cement prices. Philippine Star. 30 April.

Senate of the Philippines. 2010. Press Release [online]. 8 January. http://www.senate.gov.ph/press_release/2010/0108_escudero1.asp [accessed 1 June].

Khemani, S. and D.M. Shapiro. 1993. Glos-sary of Industrial Organisation Economics and Competition Law. Paris: Organisation for Economic Co-operation and Development (OECD), Centre for Cooperation with Econo-mies in Transition.

PIDS Policy Notes are observations/analyses written by PIDS researchers on certain policy issues. The treatise is holistic in approach and aims to provide useful inputs for decision-making.

The author is Senior Research Fellow at the Institute. She wishes to thank Mr. Donald Yasay and Ms. Fatima del Prado of PIDS for their assistance in obtaining the data on cement prices. The views expressed are those of the author and do not necessarily re�lect those of PIDS or any of the study’s sponsors.


Since its founding in 2001, TXTPower has looked at issues from three perspectives—those of consumers, netizens and citizens. And we do so again as we attempt to make sense of the Competition Authority formed by President Aquino, the competition bills �iled in both houses of Congress, and in the face of the reemergence of a monopoly in the telecommunications sector.

Remember PLDT monopoly practices? Under a long-running monopoly until the mid-1990s, Filipinos were made to endure years or decades of waiting for the installation of telephone lines, and another long waiting time for the dial tone. Long distance services, especially international calls, were so expensive and we had to line up at the nearest PLDT of�ice and calling center. Under a monopoly, only the monopolist prospers and the rest of us experience stunted growth.

There was no other way for the Philippines to improve its telecom sector then than to dismantle the PLDT monopoly.

Initial changes and reforms under Republic Act 7925 propelled competition in the tele-communications sector as far as establishing a number of high-capital companies, espe-cially in the cellular mobile telephone system (CMTS) and the wired landline systems.

It would take several years for the public to bene�it from RA 7925 in the form of the in-troduction of prepaid cellular phones, pre-paid cards, prepaid IDD, the elimination of national IDD via cellular phones, the intro-duction of prepaid phone reloading, and the introduction of unlimited call and text ser-vices. It is easy to laud the telcos for these bene�its, but a closer inspection would re-veal that many of these “bene�its” accrued to consumers after they themselves for and demanded them.

After telcos cashed in on the deregulation policy unleashed by RA 7925 in the form of unregulated windfall pro�its, the mergers and buy-outs started, and consumers again funded these corporate actions as well as a number of bad business decisions made by the corporations. Globe Telecom, would buy Islacom, the country’s �irst GSM provid-er. Today, the PLDT network has under its wings Piltel, Smart, Cure and, of late, Digi-tel/Sun Cellular. In the case of Smart, con-sumers reportedly subsidized its migration from the failed ETACS to GSM.

Monopolies and any other anti-competitive business formations are bad for consumers, if only for the simple reason that they mean less number of choices in the market. If and when a monopoly emerges or reemerges, the �irst victim is the consumer.


Philippines: Competition law, policy hope to curb monopolies, cartelsAnthony Ian “Tonyo” Cruz TXTPower


To clarify, consumers are not against merg-ers and acquisitions as these are facts of business activity. We however raise serious questions on the legality of the transactions entered into by telcos among themselves. For even as they merge and acquire, consumers still reel from such practices as the charg-ing of arbitrarily-set interconnection fees for calls and texts made across telcos. The prob-lem persists up to this day, driving up the cost of calls and text.

A monopoly captures the market not by pro-viding superior products but by the capri-cious use of the monopolist of his immense resources and prerogatives to monopolize the market.

The existence or reemergence of monopolies is even made more scandalous as we see it in the telecommunications sector. It is im-portant to stress that telecommunications is not just a commodity or a business. It is a public utility that is imbued with public trust, makes use of publicly-owned resources and ultimately aims to become an enabler of the progressive goals of the public.

This public utility nature of telecommu-nications is formally expressed by the tel-cos’ application for and grant of franchises by the Congress of the Philippines. With-out such franchises, no company may en-ter into the telecommunications business. Franchises are granted, in theory, only to majority Filipino-owned companies which have the vision and the means to “roll out” telecommunications services.

Globally, regionally and nationally, there is continuing rejection of all sorts of busi-ness monopolies. Monopolies are not bad for business. The opposite is true. Monopo-

lies are bad for business. Monopolies tell companies, especially small ones, that they cannot aspire to be as big; the latter’s des-tiny is to be swallowed whole or in part by the rampaging monopolist beast.

Technologically and business-wise, the con-centration of ownership of telecommunica-tions infrastructure and franchises under a powerful monopoly poses a number of real and perceived threats and disadvantages to the majority of citizens. From violations of the right to privacy to the wholesale “pur-chase” of patents, to exclusive contracts to acquire telecom equipment, to the use of closed systems – the list seems endless – and these problems are made worse when they are perpetrated by monopolists.

The President would do well to boost con-sumer and business confidence by includ-ing in his priority legislative measures the enactment of an anti-monopoly and anti-trust law, or a competition law.

The absence of such a law has been misin-terpreted by some as a blanket license to corrupt the telecom sector in particular, and Philippine businesses and industries in general. The situation does not serve the interests of the Republic of the Philip-pines.

All we have now is a hodge-podge of dis-parate laws that offer no stiff protection to Filipinos in the face of new and reemerg-ing monopolies, or abusive companies, in the telecom sector and beyond. Addressing this situation will send a message to do-mestic and international investors that the Philippines offers fair opportunities, and does not play favorites, especially to big, moneyed and influential businessmen.


Please also allow me to address issues raised earlier – I was following the tweets – es-pecially the need for a genuine consumer movement, a consumer union that goes way beyond handing out hao siao awards. We agree. But consumer rights and welfare con-sciousness is a dif�icult task. we face so many hindrances — contempt for complaining and complainants is deep-seated and embedded in schools, and reinforced in media.

In the case of the Philippine Long Distance Telephone Company, Inc. (PLDT) buyout of Digitel/SunCellular, we saw most of the me-dia swallow hook, line and sinker the lie or spin that it was/is a done deal. Coverage was largely one-sided and shallow. That doesn’t help and also illustrates the overarching power of economic elites and monopolists viz. media. These are hindrances and stum-

bling blocks – and it would take much per-sistence, patience, grit, and united action by consumers to be able to form and propel their union and movement.

What we want to see, moving forward, in the telecom sector are: (1) a clear vision from the government on the role of infor-mation and communications technology in nation-building; (2) vibrant competition on telecom services made available to end-us-ers, MSMEs, government and industry; (3) the provision of internet access to the entire archipelago through a national broadband network free from graft; (4) the dismantling of monopolies and cartel operations in the telecom sector; and (5) the formation of a movement and union of consumers that demand better business practices and bet-ter services.


A search of the word “competition” in BusinessWorld’s online archives through the years, shows a decline since the mid-90s in the number of news headlines which mention the word.

Actually, it is not just journalists who have stopped using the world. A searching on Google of “Philippine Competition” reveals the same trend among book writers, academics, and policy experts.


Journalism and competitionRoel Landingin Financial Times


This observation on the use of the word competition in literature (books and newspapers) or the state of competition can be further studied. But the renewed interest on competition policy, as evidenced by this forum, is indeed very much welcome.

We, journalists, have a professional if self-interested stake in competition. The greater the competition, the more stories we write about the companies involved.

Why do we write more stories about PLDT, Globe, and Digitel compared to Manila Electric Company (Meralco)? It’s not because they place more ads in the media, but because the mobile phone industry, at least before PLDT’s acquisition of Digitel, is competitive, whereas Meralco is a monopoly. So how many stories were being written about Fortune Tobacco and Philip Morris after they merged? I haven’t made a count, but I guess far fewer than before the merger.

So, like many of you, I’m convinced that we need a competition law more than ever and I hope the lawmakers are convinced too.

Based on my experience covering indus-tries, particularly utilities, I also think that greater competition is not enough to maximize consumer welfare and ensure economic efficiency. Better regulation and consumer empowerment are also neces-sary.

The Philippines privatized water service in Metro Manila in 1997. The process of selecting the private contractor was very competitive and transparent. At least four companies took part in the bidding, which was open to the public. The initial outcome was a drastic reduction in water rates. So from 8.78 per cubic meter before privatization, it fell up to 4.02 in the eastern half of Metro Manila 7.21 in the western half.

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However since then, water rates have gone up eight-folds in the eastern section and six-folds in the western section.

I’m not saying the water rate increases are not justified. They may very well be; after all, since 1997 water service has also im-proved considerably in terms of coverage and reliability. The key question is whether the water rate increases are commensurate to the improvements in water and sanita-tion services. In principle, we should be assured that this is the case. After all, the private water companies are regulated by the MWSS and its regulatory office, which approve all the water rate increases. How-ever, I begin to wonder when I hear that both Manila Water and Maynilad water services are some of the most profitable units of their respective conglomerates. The composition of the MWSS board un-der the previous administration and their preoccupation with generous bonuses for themselves and their employees do not in-spire confidence in their regulatory deeds. That is why, along with effective regulation, we still need consumer empowerment of which access to information is a key ingre-dient.

As consumers and journalists, we should be able to find out for ourselves the basics, including the detailed and technical calcu-lations that underscore regulatory deci-sions. As you know, basic water rates are adjusted or re-based once every five years. So far those have meant big jumps in water tariffs. The last time was in 2008 and 2009, and many of us reported the story then. What is not widely known is that those in-creases included initial costs for building Laiban and Wawa dams between 2008 and 2012. Well, the MWSS has basically shelved plans for building the two dams and is looking to invite private investors to carry them out as PPP (Public-Private Partner-ship) projects. Yet our water rates continue to include components to cover the initial costs of building those two water sup-ply projects. Unfortunately, even Congress could not get straight answers on this mat-ter for the past year. This is one case where an access to information law can help ad-vance consumer welfare.

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Greater industry competition is good for us journalists because rivalry yields more sto-ries. But that is also a weakness if we become too dependent on business rivalry or con�lict to generate stories. It could lead to a situation where we don’t cover industry or policy issues because of the absence of rivalry or disagree-ments among the main business players.

For example, the question on how telecom-munications frequencies are awarded has long �igured in academic research on the weak state of competition in the telecommunica-tions industry. However, it seems to me that the issue gained media mileage only recently when Globe raised the issue because of its op-position to PLDT’s acquisition of Digitel.

There is a lack of media coverage on the consumer sector. It is because of the way

coverage is structured. These companies are covered by business reporters where-as consumer groups are covered by some other beat reporters, those covering NGOs (non-government organizations) or cause-oriented sector. So we have this fragmenta-tion.

It’s time for not only reporters, but editors and news managers, to think about reduc-ing the fragmentation that happens in jour-nalism. It is really worthwhile to develop sources and to do stories across different sectors covering different industries.

As journalists we benefit from greater com-petition because it makes our work easier. But it is in the absence of competition that our readers and consumers need us and good journalism the most.


CONCLUSION AND RECOMMENDATIONS

Legislation

Research is important. It is critical to ensure that legislation be based on evidence. It is necessary to have a thorough and sober analysis of the state of competition in the Philippines as well as the state of current market and economy to make sure that the law is appropriate to the situation in the Philippines.

To make legislation truly relevant and useful, the discussions on and the implementation of relevant laws should include all stakeholders (consumers, industry players, government, academe, research institutions, etc.). Experts can get together and provide technical assistance and build capacity to promote competition. The advocacy requires a number of investments as well as longer term engagements.

Media

Media play a critical role in all the phases of policy making. Reports need to clarify the pros and cons, the gains and losses, so that the public forum can also serve in the search for solutions that address the competitive needs. The institution needs to train itself to favor process- rather than event-based news. Media advocacy and journalists’ groups should campaign for more information dissemination and awareness of issues and processes.

Public

The passage of the law on competition is just the beginning of the problem. The public needs to be informed so people can see for themselves the gaps in implementation and enforcement.

The people should be involved not only in tracking legislation as it moves in Congress, where changes can be changed to favor vested interests. The public also needs to be able to check market abuse. For competition policy to be truly effective, consumer welfare groups must be formed and gain strength, to provide the public with the force of collective pressure and action for correction when necessary.


Speakers

Anthony A. AbadManaging DirectorTrade Advisory Services

Rafaelita M. AldabaSenior FellowPhilippine Institute for Development Studies

Lai-Lynn BarcenasAssociate DirectorAsian Institute of Management Policy Center (APC)

Anthony Ian CruzCo-founderTXTPower

Melinda Quintos de JesusExecutive DirectorCenter for Media Freedom and Responsibility

Roel LandinginCorrespondentFinancial Times

Ronald U. MendozaExecutive DirectorAPC

Geronimo L. SyAssistant SecretaryDepartment of JusticeCo-Chair, Senate Technical Working Group on the Anti-Trust Legislation

CMFR MEDIA FORUM ON COMPETITION POLICY


Participants

AIM Conference Center Manila– Jigs Abulad– Ma. Afrecita D. Nieva

Asian Institute of Management– Edilberto de Jesus– Meg Lee– Anne Ong-Lopez– Meyps Quiñones

Asian Institute of Management Policy Center– Steve Almeda– Jhoan Estipular

Ayala Young Leaders Alliance– Joseph G. Navarro

BusinessWorld – Noemi Gonzales

Central Democratic Movement – Diana Afable-Lorenzo

Department of Justice– Florina Agtanap

Free Legal Assistance Group– Gilda E. Guillermo

GMA News Online– JM Tuazon

International Center for Innovation, Transformation and Excellence in Governance (InciteGov)– Niel Lim

Kapisanan ng mga Brodkaster ng Pilipinas (Association of Broadcasters of the Philippines)– Reynaldo “Rey” Hulog– Rudolph “Rejie” Jularbal– Ruperto “Jun” Nicdao Jr.

Konrad Adenauer Stiftung– Margo Mercado

Makati Business Club– Patrick Chua

Manuel L. Quezon University– Dianne Jhoy M. Pedroso – Kenneth Rey R. Rentutar– Bayani Santos– Raymond A. Sebastian

Minimal Government Thinkers, Inc.– Nonoy Oplas

Of�ice of Sen. Manuel “Manny” Villar– Sarah Mirasol– Andrei Mortal

Philippine Center for Investigative Journalism– Karol Ilagan– Jessa Jarilla – Ed Lingao– Malou Mangahas

Philippine Press Institute– Ariel C. Sebellino

Polytechnic University of the Philippines– Darlene Apanay – John Paolo J. Bencito– Patrisnia Catilo– Elaine Fallarcuna– Jayen D. San Diego– Vic Rosalio S. Tahud


Presidential Communications Operations Offi ce– Gilbert Remi Lacsina

Puyat Jacinto & Santos Law– Jessica Hilado– Shirley Velasquez

The Manila Times– Krista Montealegre

University of the Philippines– E. Patalingauo


Executive Order No. 45, s. 2011

MALACAÑAN PALACEMANILA

BY THE PRESIDENT OF THE PHILIPPINES

EXECUTIVE ORDER NO. 45

DESIGNATING THE DEPARTMENT OF JUSTICE AS THE COMPETITION AUTHORITY

WHEREAS, Section 20, Article II of the 1987 Constitution provides that the State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments;

WHEREAS, Sections 13 and 19, Article XII of the 1987 Constitution provide that the State shall pursue a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity and shall regulate or prohibit monopolies when the public interest so requires;

WHEREAS, recent developments from the World Trade Organization (WTO), the ASEAN Free Trade Area (AFTA), and the trade liberalization initiatives under the Asia Paci�ic Economic Cooperation (APEC) forum advocate competition in domestic and international trade;

WHEREAS, there is a need to promote competition and level the playing �ield in the market;

WHEREAS, Republic Act No. 4152 approved on 20 June 1964 vests upon the Secretary of Justice the duty “to study all laws relating to trusts, monopolies and combinations, to draft 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 and/or tending to bring about non-competitive prices of articles of prime necessity, to investigate all cases involving violations of such laws, and to initiate and take such preventive or remedial measures, including appropriate judicial proceedings to prevent or restrain monopolization and allied practices or activities of trust, monopolies and combinations”;

ANNEXES


WHEREAS, Act No. 3247 enacted on 1 December 1925 and Article 186 of the Revised Penal Code, as amended, both penalize monopolies and combinations in restraint of trade;

WHEREAS, the Department of Justice (DOJ) is the principal legal counsel and prosecution arm of the government under Section 3, Chapter 1, Title III, Book IV of Executive Order No. 292 (Administrative Code of 1987) and also the central authority for matters requiring international legal cooperation;

WHEREAS, the DOJ likewise serves as the principal agency mandated to enforce the rule of law and investigate and prosecute offenders; and,

WHEREAS, the President, under Article VII, Section 17 of the Constitution; has the power and control over executive departments, bureaus and of�ices, as well as the continuing authority under existing laws to reorganize such executive departments, bureaus and agencies.

NOW, THEREFORE, I, BENIGNO S. AQUINO III, President of the Philippines, by virtue of the powers vested in me by law, do hereby order:

SECTION 1. Designation of Competition Authority. The DOJ is hereby designated as the Competition Authority with the following duties and responsibilities:

a. Investigate all cases involving violations of competition laws and prosecute violators to prevent, restrain and punish monopolization, cartels and combinations in restraint of trade;

b. Enforce competition policies and laws to protect consumers from abusive, fraudulent, or harmful corrupt business practices;

c. Supervise competition in markets by ensuring that prohibitions and requirements of competition laws are adhered to, and to this end, call on other government agencies and/or entities for submission of reports and provision for assistance;

d. Monitor and implement measures to promote transparency and accountability in mar-kets;

e. Prepare, publish and disseminate studies and reports on competition to inform and guide the industry and consumers; and

f. Promote international cooperation and strengthen Philippine trade relations with oth-er countries, economies, and institutions in trade agreements.

SECTION 2. Of�ice for Competition. There is hereby created the Of�ice for Competition under the Of�ice of the Secretary of Justice to carry out the duties and responsibilities set forth in Section 1. The Of�ice shall be manned by such number of staff including legal and technical experts, consultants and resource persons to effectively and ef�iciently pursue its mandate. The Secretary of Justice shall designate the Chief/Head and members of the said Of�ice.


SECTION 3. Funding. To carry out the provisions of this Order, initial funds for the operations of the Of�ice for Competition shall be taken from the available funds of the DOJ. Thereafter, such amount as may be deemed necessary for the annual operations of said Of�ice, shall be incorporated and included in the annual budgetary appropriations of the DOJ.

SECTION 4. Separability Clause. If any provision of this Executive Order is declared invalid or unconstitutional, the other provisions not affected thereby shall remain valid and subsisting.

SECTION 5. Repealing Clause. All orders, rules, regulations, and issuances, or part thereof, which are inconsistent with this Executive Order, are hereby repealed, amended, or modi�ied accordingly.

SECTION 6. Effectivity. This Executive Order shall take effect immediately upon publication in a newspaper of general circulation.

DONE, in the City of Manila, this 9th day of June, in the year of our Lord, Two Thousand Eleven.

(Sgd.) BENIGNO S. AQUINO III

By the President:(Sgd.) PAQUITO N. OCHOA, JR. Executive Secretary


Republic of the PhilippinesHOUSE OF REPRESENTATIVES

Quezon City

FIFTEENTH (15th) CONGRESSFirst Regular Session

HOUSE BILL NO. 4835

(In Substitution of House Bill Nos. 549, 913, 1007, 1583, 17331980, 3100, 3134, 3244, 3476, 3534 and 3985)

Introduced by Representatives Ponce-Enrile, Yap S., Cari, Alvarez A., Apacible, Arroyo D., Macapagal-Arroyo G., Teodoro, Rodriguez R., Rodriguez M. Jr., Garcia A., Benitez, Aumentado, Umali C., Tañada, Gullas, Belmonte F., Mira�lores, Golez A., Nograles, Duavit, Biron, Defensor, Treñas, Casiño, Villarica, Mandanas, Fernandez, Garay, Del Rosario A.G., Sacdalan, Joson, Rodriguez I., Lacson-Noel, Yu, Ferrer J., Sahidula, Lagdameo A., Bonoan-David, Mellana, Sakaluran, Quisumbing, Unabia, Batacabe, Colmenares, Herasco, Villar, Pancho, Cojuangco E., Enverga, Cajayon, Tugna, Ty, Romualdez, Gonzales A., Panotes, Bagasina, Durano, Cua, Garin S., Castelo, Javier, Evardone, Bulut-Begtang, Alvarez M., Plaza, Palmones, Magsaysay E., Almario, Bello, Tinio, Rivera, Datumanong, Pangandaman S., and Abaya

AN ACTPENALIZING 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

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress assembled:

CHAPTER IGENERAL PROVISIONS

SECTION 1. Title. – This Act shall be known and cited as the “Philippine Fair Competition Act of 2011.”

ANNEXES


SEC. 2. Declaration of Policy. – Pursuant to the constitutional mandate that the State shall regulate or prohibit monopolies when the public interest so requires and that no combinations in restraint of trade or unfair competition shall be allowed, the State shall:

(a) Promote and enhance economic ef�iciency and free, full and fair competition in trade, industry and all commercial economic activities;

(b) Prevent the concentration of economic power in a few persons who threaten to con-trol the production, trade, or industry in order to sti�le competition, distort, manipu-late or constrict the discipline of free markets, increase market prices in the Philip-pines; and

(c) Penalize all forms of anti-competitive mergers, with the objective of protecting con-sumer welfare and advancing domestic and international trade and economic devel-opment.

SEC. 3. Scope and Application. – Thus Act shall be enforceable within the territory of the Republic of the Philippines and shall apply to all areas of trade, industry and commercial economic activity. It shall likewise be applicable to international trade having direct, substantial and reasonable foreseeable effects in trade, industry or commerce in the Republic of the Philippines including those that result from acts done outside the Republic of the Philippines.

The Act shall apply to: (a) all �irms as de�ined hereunder and all their commercial agreements, actions or transactions involving goods, services or intellectual property; and (b) all agents, of�icers, employees, partners, owners, directors, consultants, stockholders, representatives, managers, supervisors, and all other natural persons who, acting on behalf of judicial persons shall authorize, engage or aid in the commission of representative practices prohibited under his Act.

This Act shall apply neither to the combinations or activities of workers or employees nor to agreements with their employers when such combinations, activities, agreements, or arrangements are designed solely to facilitate collective bargaining in respect of conditions of employment.

SEC. 4. De�inition of Terms. – As used in this Act, the following terms shall be de�ined as:

(a) “Agreement” shall refer to any type or form of arrangement, understanding, under-taking or concerted action, whether formal or informal or tacit, written or oral;

(b) “Cartel” shall refer to a combination of �irms, providing goods in relevant markets, acting or joined together to obtain a shared monopoly to control production, sale and price, or to obtain control in any particular industry or commodity, or a group of �irms that agree to restrict trade. It shall also refer to �irms or section of �irms having common interest designed to promote the exchange of knowledge resulting


from scienti�ic and technical research, exchange of patent rights and standardization of products among themselves with the intent of preventing, restricting or distorting competition;

(c) “Commission” shall refer to the process by which economic agents, acting indepen-dently in a market, limit each other’s ability to control the prevailing conditions in the market;

(d) “Competition” shall refer to the process by which economic agents, acting indepen-dently in a market, limit each other’s ability to control the prevailing conditions in the market;

(e) “Control” shall refer to at least twenty percent (20%) ownership, directly or indi-rectly, of a �irm or a group of �irms by another �irm;

(f) “Dominant Position” shall refer to a situation where a �irm, either by itself or acting in collusion with other �irms, is in a position to control a relevant market for the sale of a particular good or service by �ixing its prices, excluding competitor �irm, or control-ling the market in a speci�ic geographical area;

(g) “Firm” shall refer to any person, natural or juridical, partnership, combination or as-sociation in any form, whether incorporated or not, domestic or foreign, including those owned or controlled by the government, engaged directly or indirectly in any economic activity: Provided, That, two �irms, one of which is controlled by the other, shall be treated as one �irm: Provided, further, That two or more �irms that are con-trolled by a simple �irm shall be treated as one �irm;

(h) “Goods” and “Services”: “Goods” shall refer to all types of tangible and intangible property that could be bought and sold, and the possession of which could be trans-ferred in whole or in part, temporarily or permanently;

“Services” shall refer to the provision of things of value or articles or items that could be used by one person, whether natural or juridical through human interaction or through the use, without transfer of ownership, of the facilities of the provider by the client, or a combination of both. It shall include all non-tangible goods. It is the non-material equivalent of a good, consumed at the point of sale and does not result in ownership;

(i) “Market” and “Relevant Market”: “Market” shall refer to a place or venue for commer-cial activity, which may be a city, province, region, the whole area of the Philippines, or which may extend beyond the borders of the Republic of the Philippines, where articles are bought or sold. It shall also refer to the geographical or economic extent of commercial demand;


“Relevant Market” shall refer to the line of commerce in which competition has been restrained. It shall also refer to the geographic area involved, including all reason-ably substitutable goods, and all competitors, to which consumers could turn if the restraint or abuse results in the signi�icant increase in prices.

(j) “Mergers” shall refer to two or more undertakings, previously independent of one another, join together. This de�inition includes transactions whereby two �irms le-gally merge into one (mergers), one �irm takes sole control of the whole or part of another (acquisition or takeovers), two or more �irms acquire joint control over another �irm (joint ventures) and other transaction, whereby one or more under-takings acquire control over one or more undertakings, such as interlocking direc-torates; and

(k) “Monopoly” shall refer to a privilege or undue advantage of one or more �irms, con-sisting in the exclusive right to carry on a particular business or trade, and/or man-ufacture a particular product, article or object of trade, commerce or industry. It is a form of market structure in which one or only a few �irms dominate the total sale of a product or service.

CHAPTER IIPHILIPPINE FAIR COMPETITION COMMISSION

SEC. 5. Philippine Fair Competition Commission – To implement the national policy and attain the objectives and purposes of this Act, an independent Commission is hereby created, to be known as the Philippine Fair Competition Commission (PFCC), which shall hereinafter be referred to as the Commission, and shall be organized within one hundred eighty (180) days after the approval of this Act.

For budgetary purposes, the Commission shall be under the Of�ice of the President.

(a) Composition. – The Commission shall be composed of a Chairperson and four (4) Associate Commissioners. The Chairperson and Commissioners shall be citizens and residents of the Philippines, at least forty (40) but not more than sixty-five (65) years of age, of good moral character and of recognized probity and inde-pendence. The Chairperson and two (2) of the Associate Commissioners shall be members of the Philippine Bar and the remaining two (2) shall be of recognized competence in the field of economics preferably in industrial organization eco-nomics, or finance, commerce accounting or management. They must have active-ly practiced their professions for at least ten (10) years, but must not have been candidates for any elective national or local office in the immediately preceding elections, whether regular or special.


(b) Term of Office. – The Chairperson and the Associate Commissioners shall be ap-pointed by the President of the Philippines. The term of office of the Chairperson and the Associate Commissioners shall be six (6) years without reappointment. The Chairperson shall hold office for six years and of the first four (4) Associate Commissioners, two (2) shall hold office for a term of four (4) years and two (2) for a term of two (2) years. In case a vacancy occurs before the expiration of the term of office, the appointment to such vacancy shall be only for the unexpired term of the predecessor;

(c) Prohibition and Disquali�ications. – The Commissioners shall not, during their tenure, hold any other of�ice of employment. They shall not, during their tenure, directly or indirectly practice any profession, participate in any business, or be �inancially in-terested in any contract with, or any franchise, or special privileges granted by the government or any subdivision, agency, or instrumentality thereof, including gov-ernment-owned and controlled corporations of their subsidiaries. They shall strictly avoid con�lict of interest in the conduct of their of�ice. They shall not be quali�ied to run for any of�ice in the election immediately succeeding their cessation from of�ice. They shall not be allowed to appear or practice before the Commission for two (2) years following their cessation from of�ice.

No spouse or relative by consanguinity or af�inity within the fourth civil degree and no former law, business, or professional partner or associate of any of the Commis-sioners, the Chairperson and the Secretary of the Commission may appear as counsel or agent on any matter pending before the Commission or transact business directly or indirectly therein during his/her incumbency and within one (1) year from his/her cessation of of�ice.

(d) Compensation of Commissioners. – The Chairperson of the Commission shall hold the rank of and shall have the privileges and compensation equivalent to that of a Depart-ment Secretary or Presiding Justice of the Court of Appeals, whichever is higher, while the Associate Commissioner shall each hold the rank of and shall have the privileges and compensation equivalent to that of a Department Undersecretary or Associate Justice of the Court of Appeals, whichever is higher.

(e) Quorum. – Three (3) members of the Commission shall constitute a quorum and the af�irmative vote of three members (3) shall be necessary for the adoption of any rule, ruling, order, resolution, decision or other acts of the Commission en banc.

(f) Principal Of�ice, Branch and Venue. – The Commission shall hold its principal of�ice in Metro Manila but it may conduct hearings outside of Metro Manila upon prior notice for inquiries, studies or any other proceedings required for the proper and ef�icient exer-cise of its power and the discharge of its duties. It may establish branch of�ices outside of Metro Manila as may be necessary for the effective discharge of its functions.


(g) Staff. – The Commission shall appoint an adequate staff which shall be headed by an Executive Director, �ix the compensation in accordance with the Revised Compensa-tion and Position Classi�ication Law and determine their status, quali�ications and duties. The Executive Director shall be appointed by the President and shall have relevant experience in any of the �ields of law, economics, commerce, management or �inance for at least ten (10) years. Provided, That the Executive Director shall be a Career Executive Service Of�icer (CESO). The members of the technical staff, ex-cept those performing purely clerical functions, shall process at least a Bachelor’s Degree in the following lines of specialization: economics, preferably in industrial organization; law; �inance; commerce; accounting; or management.

SEC. 6. Original and Exclusive Jurisdiction, Powers and Functions – Commission shall have original and exclusive jurisdiction to enforce and implement the administrative provisions of this Act, its implementing rules and regulations, and all other competition laws, and in particular;

(a) Powers of the Commission Without Hearing. – The Commission shall have the power to do the following acts, without hearing

(1) Motu Proprio Investigation or Upon Complaint. – To commence investigation, on its own initiative or upon the complaint of any person, any and all violations of this Act and other competition laws and cause the issuance of a cease and desist order prior to the commencement of a preliminary inquiry, and/or the institution of a civil or administrative action;

(2) Administrative Action. – To attest and �ile all complaints for appropriate administra-tive relief from or against violations of this Act or other competitions laws;

(3) Civil Action. – To attest and �ile, on behalf of the State, civil complaints for damages to business or property of the State, arising from a violation of this Act and other competition laws;

(4) Deputization. – To require any government agency to lend assistance and informa-tion necessary in the discharge of its responsibilities under this Act, and examine, if necessary, pertinent records and documents in the possession of such government agency;

(5) Issuance of Subpoena. – To issue subpoena, subpoena duces tecum and subpoena ad testi�icandum in the exercise of its functions, powers and duties under this Act, sub-ject to the following standards:i. No subpoena shall be issued to require the production or disclosure of trade

secrets as de�ined in paragraph (c) (2) hereof;ii. A subpoena may be quashed only by means of a motion duly set for hearing and

on the grounds prescribed by the Rules of Court;iii. A person appearing before the Commission in obedience to a subpoena shall be

advised, before he is required to testify or produce any documentary or real evi-dence, of his right to be assisted or represented by a counsel of his choice, and if


he has none, the Commission shall appoint a de of�icio counsel for him; and of his right to avail of the privilege of immunity from prosecution herein prescribed;

(b) Powers of the Commission Upon Prior Notice and Hearing. – The Commission may exercise the following powers, only upon prior notice and hearing:

(1) Binding Rules – To issue binding rulings;(2) Showing Cause Order and Decision – To issue show cause orders, and thereafter, render

decision thereon;(3) Consent Judgment – To approve, or disapprove, proposals for consent judgment;(4) Preliminary Inquiry – To conduct the required preliminary inquiry of cases involving

violations of this Act and other competition laws; and thereafter, if appropriate, to sign and �ile the proper criminal complaint before the Department of Justice; and

(5) Administrative Fines, Penalties and Sanctions – To impose the appropriate adminis-trative �ines or penalties herein authorized to be imposed.

(c) Other Powers and Functions of the Commission:(1) Industry Studies and Company Pro�ile. – To gather and compile information and

investigate from time to time, the way a given industry is structured or organized whether as a monopoly, oligopoly, or competitive; the way the �irms within that industry act, behave, or conduct themselves in such matters as setting prices, de-termining output, and the resulting performance of the industry as a whole; the organization, business, conduct, practices and management of any person, part-nership, or corporation engaged in trade, commerce, or industry and its relation to individuals, partnerships, associations, corporations, �irms and other business enterprises;

(2) Annual and Special Reports. – To require, by general or special orders, �irms en-gaged in trade, commerce, or industry to �ile with the Commission in such form as the Commission may prescribe, annual or special reports, or answers in writing to speci�ic questions, furnishing the Commission such information as it may require as to the organization, business, conduct, practices, management and relation to other persons of the respective natural or juridical persons or entities �iling such reports or answers in writing except that the Commission shall not require, either by a speci�ic order or by a subpoena, the disclosure or production of trade secrets such as a secret formula, pattern, device or compilation of information, including names of customers, which is used in one’s business and which gives one an op-portunity to obtain advantage over competitors who do not know or use it. Trade secrets shall include a plan or process, tool, mechanism, or compound known only to the owner and his employees to whom it is necessary to con�ide it;

(3) Public Disclosure of Information. – To make public, from time to time, such portions of the information obtained by it under this Act, except trade secrets and names of customers, as it shall deem expedient in the public interest;


(4) Reports and Recommendations to Congress. – To submit annual and special reports to Congress, through the Congressional Oversight Committee on Fair Competition created under this Act, including proposed legislation for the regulation of trade, commerce, or industry, and provide for the publication of its reports and resolu-tions in such form and manner as may be best adopted for public information and transparency; and

(5 ) Trade Conditions, Domestic and Foreign. – To study, from time to time, trade condi-tions in and with foreign countries where associations, combinations, or practices of manufacturers, merchants, or traders, or other conditions, may affect the for-eign trade of the Philippines, and report to Congress its �indings and recommenda-tions thereon as it may deem advisable.

SEC. 7. Jurisdiction of Regional Trial Courts. – The Regional Trial Court shall have jurisdiction over cases arising from violations of the provisions of this Act.

With respect to personal actions arising from violations of the provisions of this Act, actions may be commenced and tried where the plaintiff or any of the principal plaintiff resides, or where the defendant or any of the principal defendants reside, or in the case of a non-resident defendant, where he may be found, at the election of the plaintiff.

CHAPTER IIIPROHIBITED ACTS

SEC. 8. Anti-competitive Agreements. – It shall be unlawful for firms to engage in horizontal and vertical agreements that prevent, distort or restrict competition, unless otherwise exempted.

i. “Horizontal agreement” means an agreement entered into between two or more en-terprises operation at the same level in the market;

ii. “Vertical agreement” means an agreement entered into between two or more enter-prises, each of which operates, for the purposes of the agreement, at different levels of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell or resell certain goods or services;

There shall be a prima facie for the existence of an anti-competitive agreement if and when the Commission finds that two or more firms that are ostensibly competing for the same relevant market and actually perform uniform or complementary acts among themselves which tend to bring about artificial and unreasonable increase, decrease or fixing in the price of any goods or when they simultaneously and unreasonably increase, decrease or fix the prices of their seemingly competing goods thereby lessening competition in the relevant market among themselves.


(a) Pricing Fixing – Any agreement among competitors to raise, suppress, �ix or oth-erwise 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 �irmly, eliminating or reducing discounts, adopting a standard or formula for comput-ing prices, maintaining certain prices 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 or cartel, or lessening competition.

(b) Bid Rigging – Any agreement to �ix 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.

In determining whether there is price �ixing or bid rigging the following circumstances

may be considered:(1) generally, any considered evidence that two sellers of similar goods have agreed

to set the price of their goods, to sell only a certain amount of their goods, or to sell a certain amount of their goods, or to sell only to a limited number of buyers or consumers;

(2) a drastic change in prices of goods and prices of goods and services involving more than one seller of similar goods of different brands, particularly if the changes in prices take place in equal amount and about the same time;

(3) a seller refusing to sell based on an agreement with a competitor;(4) the same firm has repeatedly been the low bidder who has been awarded con-

tracts for a certain service or a particular bidder seems to win bids on a fixed-rotation;

(5) there is an unusual and unexplainable difference between the winning bid and all other bids; and

(6) the same bidder bids substantially higher on some bids than on others, and there is no logical reason to explain the difference

SEC. 9. Abuse of Dominant Position. – It shall be unlawful for one or firms to abuse their dominant position, by engaging in unfair methods of competition, or in unfair or deceptive trade practices, or entering into combinations in the form of trust or otherwise, or conspiracy, with the purpose and effect to prevent, restrict, or distort competition. Abusive agreements such as, but not limited to, any of the following, shall be deemed to fail under the crime of abuse of dominant position:

(a) Predatory Behavior Towards Competitors – Any agreement, including, but not lim-ited to, selling goods at below relevant cost with the intent of driving competitors out of the market, or creating barriers to entry;


(b) Limitation and Control of Markets – Any agreement to limit or control production, markets, technical development, or investment with the purpose and effect of cre-ating a monopoly or cartel, or lessening competition;

(c) Market Allocation – Any agreement to divide the market, whether by volume of sales or purchase or by territory, by type of goods sold by customers or sellers or by any other means, with the purpose and effect of creating a monopoly or cartel, or lessening competition;

(d) Arrangements to Share Markets or Sources of Supply – Any agreement to share markets or sources or supply of raw materials, with the purpose and effect of cre-ating a monopoly or cartel, or lessening competition;

(e) Price Discrimination – Any agreement prescribing or charging, directly or indirectly, discriminatory pricing terms or conditions in the supply or purchase of goods of like grade and quality with the purpose and effect of creating a monopoly or cartel, or substantially lessening competition: Provided, That nothing contained herein shall be constructed to prohibit permissible price differentials unless the same shall have the effect of preventing, restricting or distorting competition: Provided, further, That for the purpose of this section the following shall be considered permissible price dif-ferentials:

(1) Socialized Pricing – Socialized pricing for the less fortunate sector of the economy;

(2) Volume Discounts - Price differentials which re�lect an allowance for differ-ences in the cost of manufacture, sale, or delivery resulting from differing methods or quantities in which the goods are sold or delivered to the pur-chasers;

(3) Competitive Pricing – A price differential or other terms of sale in response to the competitive price of payments, services or facilities furnished by a competitor;

(4) Bona�ide Selection of Customers – The selection of customers on bona �ide transaction; and

(5) Price Differentials Due to Changing Market Conditions or Marketability of Goods - Price change s from time to time in response to changing condi-tions affecting the market or the marketability of the goods concerned such as, but not limited to, actual or imminent deterioration of perishable goods, obsolescence of seasonal goods, distress sales under court process, or sale on good faith when a business is going to be discounted.

(f) Exclusivity Arrangement – Any agreement imposing restrictions on the lease or con-tract for sale or trade of goods concerning where, to whom, or in what forms goods may be sold or traded, such as, but not limited to �ixing prices, or giving preferential discounts, or rebate upon such price, or imposing conditions not to deal with compet-ing �irms, where the purpose of such agreement is to lessen competition: Provided,


That nothing contained herein shall prohibit or render unlawful permissible fran-chising, licensing or exclusive distributorship agreements;

(g) Tie-in Arrangements – Any agreement making the supply of particular goods depen-dent upon the purchase or lease of other goods from the supplier or his consignee, where the purpose and effect of such sale or lease or such condition is to substantially lessen competition or to create a monopoly or cartel;

(h) Boycott – Any concerted to sell or conspiracy not to sell or to stop doing business on the part of the suppliers of any goods, unless for a legitimate purpose.

SEC. 10. Anti-competitive Mergers – No firm engaged in commerce or trade shall acquire, directly or indirectly, the whole or any part of the stock or other share capital, or the whole or any part of the assets, of one or more firms engaged in any line of commerce or trade where the effect of such acquisition of such stocks, share capital, or assets, or the use of such stock by voting or granting of proxies or otherwise maybe to substantially lessen competition, or tend to create a monopoly.

(a) Permissible Stock or Asset Acquisition or Ownership. – Nothing contained herein, however, shall be construed to prohibit:(1) A firm from purchasing the stock or other share capital of one or more cor-

porations solely for investment and not using the same voting or otherwise to bring about, or in attempting to bring about, the substantial lessening of competition;

(2) A corporation from causing the formation of subsidiary corporations, or from owning and holding all or part of the stock of such subsidiary corporations, for the actual carrying on of their immediate lawful business, or the natural and legitimate branches or extensions thereof; and

(3) A firm continuing to own and hold the stock or other share capital or assets of another corporation which it acquired prior to the approval of this Act.

(b) Notification Prior to Stock or Asset Acquisition. – No firm shall acquire, directly or indirectly, the shares of stock or assets of any other firm, if as a result of the acquisition, the acquiring firm would own twenty percent (20%) or more of the shares of stocks or assets of the acquired firm, unless, the acquiring and selling firm notify, prior to the conclusion of the agreement such acquisition and in the prescribed form, the Commission of such proposed acquisition. Only the acquir-ing firm is required to make the notification in a tender offer. The contemplated acquisition shall be deemed approved, unless the Commission, within thirty (30) calendar days from receipt of the notification, orders the acquiring firm to show cause why the proposed acquisition shall not be declared as prohibited under this Act. The show cause order shall set forth the facts upon which it is based. The acquiring or selling firm may contest the show cause order, in which case, the proposed acquisition shall be considered enjoined until the Commission shall


have rendered a decision on the proposed acquisition after due notice and hear-ing, within further sixty (60) calendar days in accordance with the procedure pre-scribed herein for the disposition of a show cause order. If the Commission fails to make a decision within the prescribed 60 calendar day limit, the acquisition shall be deemed approved and the parties may proceed to implement it.

(c) Transactions Exempt from Prior Notice Requirement. – The following classes of transactions are exempt from the prior notice requirement under this Section:(1) Acquisition of goods or realty transferred in the ordinary course or business;(2) Acquisition of bonds, mortgage, deeds of trust, or other obligations which are

not voting securities;(3) Acquisitions of voting securities of an issuer at least �ifty percent (50%) of the

voting securities of which are owned by the acquiring �irm prior to such acquisi-tions;

(4) Transfers to, or from, government agencies or instrumentalities, including gov-ernment-owned or controlled corporations;

(5) Transactions exempted from the provisions of this Act and other proper and ap-plicable laws;

(6) Transactions which require the approval of a specialized agency which regulates the particular industry;

(7) Acquisitions, solely for the purpose of investment, of voting securities, if as a re-sult of such acquisition the securities acquired or held do not exceed ten percent (10%) of the outstanding voting securities of the issuer;

(8) Acquisitions of voting securities pursuant to the preemptive right of the acquir-ing �irm or, if, as a result of such acquisition, the voting securities acquired do not increase, directly or indirectly, the acquiring �irm’s per centum share of out-standing voting securities of the issuers; or

(9) Such other acquisitions, transfers, or transactions which the Commission may declare as not likely to violate the provisions of this Act or any other proper and applicable law.

CHAPTER IVFINES ANDS PENALTIES

SEC. 11. Administrative Penalties.

(a) Without prejudice to the violation of other laws, any �irms shall be found to have violated Sections 8, 9 and of this Act, or any combinations thereof, shall, for each and every violation, be punished by a �ine or not less than Ten million pesos (Php10,000,000.00) and not exceeding Fifty million pesos (Php50,000,000.00) if a natural person; by a �ine not less than Two hundred �ifty million (Php250,000,000.00) but not exceeding Seven hundred �ifty million pesos (Php750,000,000.00) if a �irm, at the discretion of the Commission.


In addition, a �ine shall be imposed in an amount double the gross proceeds gained by the violator/s or double the gross suffered by the plaintiff.

(b) Failure to Comply With An Order of the Commission. – Any person who fails or neglects to comply with any term or condition of a binding ruling, a cease and desist order or an order readjustment issued by the Commission, shall pay a �ine of not less than Fifty thousand pesos (Php50,000.00) for each violation. Each violation through a continuing failure or neglect to comply, each day of continuance of such failure or neglect shall be deemed a separate offense.

(c) Supply of Incorrect or Misleading Information. – The Commission may likewise impose upon persons or entities �ines of not less than Five thousand pesos (Php 5,000.00) to not more than One hundred thousand pesos (Php100,000.00) where, intentionally or negligently, they supply incorrect or misleading information in any document, application or other paper �iled with or submitted to the Commission or supply incorrect or misleading information in an application or other paper �iled with or submitted to the Commission or supply incorrect or misleading information in an application for a binding ruling, a proposal for a consent judgment, proceedings relating to a show cause order, or application for modi�ication of the Commission’s ruling, or order or approval, as the case may be.

SEC. 12. Criminal Penalties. – Without prejudice to the violation of other laws, any �irm that shall be found to have violated Sections 8, 9, and 10 of this Act, or any combination thereof, shall, for each and every violation, be punished by a �ine of not less than Ten million pesos (Php10,000,000.00) and not exceeding Fifty million pesos (Php 50,000,000.00) if a natural person; by a �ine of not less than Two hundred �ifty million pesos (Php250,000,000.00) but not exceeding Seven hundred �ifty million pesos (Php750,000,000.00) if a �irm, and by imprisonment not exceeding ten (10) years, or both, at the discretion of the court.

In the alternative, a �ine shall be imposed in the amount double the gross proceeds gained by the violator or double the gross loss suffered by the plaintiffs.

For purposes of determining the persons who will suffer the punishment of imprisonment as provided under the preceding paragraph, provisions of the Revised Penal Code, Title II, Articles 16, 17, 18 and 19 on the criminal liability of principals, accomplices, and accessories shall apply.

CHAPTER VENFORCEMENT

SEC. 13. Preliminary Inquiry. – The Commission shall motu proprio, or upon the �iling of a veri�ied complaint by an interested party or upon referral by the concerned regulatory agency, initiate a preliminary inquiry for the enforcement of this Act.

No criminal or civil case for violation of this Act shall be �iled or instituted by a private


party directly in court, unless there has been a preliminary inquiry conducted by the Commission and the same has been endorsed for �illing by the Commission.

SEC. 14. Powers of Concerned Government Agencies.- Notwithstanding the provisions of the preceding section, the exercise of regulatory powers by different government agencies, including local government units, over an industry or a sub-sector of an industry shall be cumulative and shall not be construed in any way as derogating from the power and authority of the concerned agency. The government agencies shall cooperate and coordinate with one another in the exercise of their powers in order to prevent overlap, to share con�idential information, for other effective measures. The Commission can seek technical assistance from sectoral regulators.

The Commission shall have primary and sole jurisdiction over competition issues, while the regulatory body shall continue to exercise jurisdiction over all matters with regard to the �irms’ operation and existence.

SEC. 15. Power to Investigate and Enforce Orders and Resolutions. – The Commission shall conduct preliminary inquiries by administering oaths, issuing subpoena duces tecum and summoning witnesses, and commissioning consultants or experts. It shall determine if any provision of this Act has been violated, enforce its orders and carry out its resolutions by making use of any available means, provisional or otherwise, under existing laws and procedures including the power to punish for contempt and to impose �ines.

SEC. 16. Self-incrimination.- Pursuant to the preceding section, a person who is the subject of any preliminary inquiry or investigation by the Commission shall produce the speci�ied document or information when so required by written notice: Provided, That no person shall be excused from disclosing any document or information to the inquiring of�icer on the ground that the disclosure of the information or document may be incriminating: Provided, further, That such document or information produced by the person who is the subject of investigation shall not be admissible as evidence against the person in criminal proceedings: Provided, �inally, That such document or information shall be admissible in evidence in civil proceedings including those arising from or in connection to the implement of this Act.

SEC. 17. Privileged Communication Exclusion.- Nothing in the preceding section shall compel the disclosure of privileged communication: Provided, That the person who refuses to disclose the information or produce the document or other material required by the inquiring of�icer in relation to the preliminary inquiry being conducted shall nevertheless be obliged to give the name and address of the �irm to whom, or by whom, or on whose behalf, such privileged communication was made.

SEC. 18. Confidentiality of Information.- Any document or information submitted by firms, as determined and marked confidential by the Commission, relevant to any


investigation being conducted pursuant to this Act shall not, in any manner, be directly or indirectly disclosed, published, transferred, copied, or disseminated. The identity of persons who provide information to the Commission and who need confidentiality to protect themselves against economic retaliation, and any Commission deliberations_in regard to current or still uncompleted matters shall remain confidential.

Any violation of this provision shall be imposed a fine of not less than One hundred thousand pesos (Php100,000.00) but not more than Five hundred thousand pesos (Php500,000.00).

SEC. 19. Leniency. – Any person or firm which cooperates or furnishes any information, document or data to the Commission before or during the conduct of the preliminary inquiry that constitutes material evidence as determined by the Commission under this Act shall be immune from any suit or charge including from affected parties and third parties: Provided, That the person or firm is not the most guilty. Provided, further, That any person or firm which cooperates or furnishes information, document or data to the Commission in connection to an investigation being conducted shall not be subjected to any form of reprisal or discrimination: Provided, furthermore, That such reprisal or discrimination shall be considered a violation of this Act and subjected to the penalties provided for under Section 11 hereof.

Nothing in this section shall preclude prosecution for persons and firms who reported to the Commission with malicious information, data and falsified documents which is damaging to the business and integrity of the persons and firms under inquiry. Such act shall likewise be considered as an unfair trade practice punishable under this Act.

SEC. 20. Termination and Action on Preliminary Inquiry. – The Commission, after considering the statements made, or documents or articles produced, in the course of any inquiry conducted by it, shall terminate the preliminary inquiry by issuing a resolution ordering its closure if no violation or infringement of this Act is found; or by issuing a nolo contendere resolution; or issuing a resolution to, singly or cumulatively, (a) impose penalties in the range provided under Section 11 hereof; (b) order the rectification of certain acts or omissions; or (c) order the restitution of the affected parties.

When determined by the facts and circumstances, the Commission shall institute a civil action by class suit in the name of the Republic of the Philippines, as parens patriae, on behalf of persons residing in the Philippines, to secure tremble damages for any inquiry sustained by such persons by reason of any violation of this Act, plus the cost of suit and reasonable attorney’s fee.

If the evidence so warrants, the Commission shall file criminal cases or violation of this Act or relevant laws before the Deopartment of Justice pursuant to Section 12 of this Act.


SEC. 21. Nolo Contendere Resolution. – Any firm under inquiry for violation of the provisions of this Act may submit to a nolo contendere resolution at any time before the termination of the preliminary inquiry by: a) the payment of an amount within the range of penalties provided for under Section 11 b) hereof by entering into an undertaking to effectively stop and rectify the acts complained against, make restitution to the affected parties, whether or not the parties are plaintiffs or witnesses; and, c) by submitting regular compliance reports as may be directed: Provided, That ten percent (10%) of the amount paid under this section shall equitably accrue to the Commission: Provided, further, That a nolo contendere resolution shall not bar any inquiry for the same or similar acts if continued or repeated.

SEC. 22. Implementing Policy; Non-Adversarial Administrative Remedies. – As an implementing and enforcement policy, the Commission shall under such rules and regulations it may prescribe, encourage voluntary compliance with this Act and other competition laws by making available to the parties concerned the following and other analogous non-adversarial and non-adjudicatory administrative remedies, before the institution of administrative, civil or criminal action:

(a) Request for Binding Ruling. – Any person who is in doubt as to whether the contem-plated or existing act, course of conduct, agreement, decision or practice is in com-pliance with, is exempt from, in violation of any of the provisions of this Act, other competition laws, or implementing rules and regulations thereof, may request the Commission, in writing, to render a binding ruling thereon;

(b) Show Cause Order. – Upon preliminary �indings mobu proprio or on written complaint under oath by an interested party, that any person is conducting his business, in whole or in part in a manner that may not be in accord with the provisions of this Act or other competition laws, and it �inds that the issuance of a show cause order would be in the interest of the public, the Commission shall issue and serve upon such person or persons a written description of its business conduct complained of, a statement of the facts, data, and information together with a summary of the evidence thereof, with an order requiring the said person or persons to show cause, within the period therein �ixed, why no order shall issue requiring such person or persons to cease and desist from continuing with ties identi�ied business conduct, or pay the administra-tive �ine therein speci�ied, or readjust its business conduct or practices;

(c) Proposal for Consent Judgment. – At any time prior to the issuance of a binding rul-ing, the promulgation of a cease and desist judgment under a show cause order or the promulgations of a decision of judgment in any administrative, civil, or criminal case, the person or persons, whose business conduct is under inquiry in the particu-lar proceedings may, without in any manner admitting a violation of this Act or any


other competition laws, submit to the Commission a written proposal for the entry of a consent judgment, specifying therein the terms and conditions of the proposed consent judgment.

(d) Consultations. – Prior to the �itting of a request for a binding ruling or the submis-sion of a proposal for consent judgment, the person or persons concerned may com-municate, in writing, with the Commission may consider necessary for the effective enforcement of this Act or other competition laws.

(e) Binding, Ruling, Cease and Desist Order, and Consent Judgment. – Based upon the facts, data, and information disclosed or supplied by the persons concerned, or established by substantial evidence during the hearing, the Commission shall issue a binding rul-ing, a cease and desist order or an approval of the proposal for a consent judgment, as the case may be, with or without conditions, to the effect that the particular act, course of conduct, agreement, decision or practice is in accord with this Act or other competition laws, or is exempt there from, or constitutes a violation thereof. If the Commission �inds that there is substantial evidence tending to show the act, course of conduct, agreement, decision or practice of the person or persons con-cerned is prohibited, it shall include in its decision the appropriate order requir-ing the person or persons concerned to perform certain acts:(1) Cease and Desist Order. – To cease and desist from continuing with the identi-

�ied act, course or conduct, agreement, decision, or practice found to be in violation of the provisions of this Act;

(2) Administrative Penalty or Fine. – to pay the �ine therein �ixed; and(3) Readjustment of Business Methods. – To adjust, within a reasonable period

therein �ixed, its method of doing business, including a corporate reorganiza-tion or divestment in the manner and under the terms and conditions pre-scribed by the Commission, as it may deem proper for the protection of the public interest.

(f) Suspension of Administrative, Civil or Criminal Proceedings. – No pending adminis-trative, civil or criminal proceedings or those �iled thereafter, against any person, corporation or any other juridical entity or its of�icers and employees, shall be sus-pended, except upon order of the Commission on proper motion, on the ground of the �iling of a request for binding ruling, the issuance of a show cause order or the �iling of a proposal for a consent judgment based, in whole or in part, on the same set of facts and issues as that of the proceedings sought to be suspended;

(g) Monitoring of Compliance. – The Commission shall monitor the compliance by the person or persons concerned, their of�icers, and employees, with the �inal and ex-ecutory binding ruling, cease and desist order, or approval of a consent judgment. Upon motion of an interested party, the Commission shall issue a certi�ication to the effect that the person or persons concerned have, or have not, as the case may


be, complied with a �inal and executory ruling, order, or approval;

(h) Inadmissibly in Evidence. – The request for a binding ruling, the show cause order, or the proposal for consent judgment; the facts, data, and information therein con-tained or subsequently supplied by the person or persons concerned; admissions, oral or written, made by them against their interest; all other documents �iled by them including their evidence presented in the proceedings before the Commis-sion; and the judgment rendered thereon, shall not be admissible as evidence in any administrative, civil or criminal proceedings against such person or persons, their of�icers, employees and agents nor constitute a basis for the introduction of the binding ruling, the cease and desist order, or the consent judgment as prima facie evidence against such persons in any such action of proceeding;

(i) Modi�ication or Reversal of Ruling, Order or Approval. – The Commission may motu proprio or upon petition of an interested party, after notice and hearing, reopen and alter, modify, or set aside, in whole or in part, a binding ruling, a cease-and-desist or-der, or an approved consent judgment:(1) Whenever conditions of material fact or law have so changed as to require such

action;(2) When the concerned person or persons fail or refuse, without justi�iable cause

therefore, to comply with any condition attached to such ruling order, or approv-al, including an order to readjust their method of doing business; or

(3) When the ruling, order, or approval was based on deliberately falsi�ied material fact, data, or information supplied by an interested party bene�ited by such rul-ing, order, or approval.

The modi�ication or reversal of a binding ruling, a cease and desist order, or an approved consent judgment shall have no retroactive effect and shall not affect or impair any right legally acquired prior to the unjusti�ied failure or refusal to comply as speci�ied in paragraph (2) hereof, or have deliberately supplied such falsi�ied material fact, data or information as speci�ied in paragraph (3) above, is barred from claiming any vested right therein.

SEC. 23. Standards. – In the exercise of its powers or in the discharge of duties under this act, the Commission shall consider the following:

(a) the way a given industry is structured or organized whether monopolistic, oligopolis-tic, or competitive;

(b) the ways the persons engaged in business within a given industry act, behave or con-duct themselves in such matters as setting prices, determining output, and other rel-evant factors and the resulting performance of the industry as a whole;

(c) the supply and demand situation for the relevant goods or services;


(d) the appreciable impact of the particular market conduct on market conditions, if any;

(e) the need to bring together complimentary skills to avoid duplication and promote ef-�iciency in the industry;

(f) the need to determine whether or not the anticompetitive effect of a particular mar-ket conduct may be offset by increased ef�iciency and reduction of excessive or un-necessary expenses;

(g) the cost and pro�it levels of the industry;

(h) the need to increase productivity in the particular industry involved;(i) the state of the industry, including the need to develop it or save it from its distressed

state;(j) the need of the industry to work more rationally and increase their productivity and

competitiveness on a larger market;

(k) the need to respond to the international competition and other developments in the international market;

(l) the need to encourage or develop small and medium-sized industries;

(m) the impact of the market conduct on the economy and on the consuming public, par-ticularly low income groups;

(n) the need to pool capital resources;

(o) the extent to which the consumers have a possibility of choice of the product or ser-vice involved;

(p) the economic and �inancial power of the parties concerned;

(q) the attainment of the objectives which are given priority interest in the general inter-est of the country, including the need for accelerated industrialization; and

(r) the extent to which less restrictive practices are available.

SEC. 24. Contempt. – The Commission or any of its Divisions may summarily punish for contempt by imprisonment not exceeding thirty (30) days or by �ine, or both, any guilty of such misconduct in the presence of the Commission or any of its Division in its vicinity as to seriously interrupt any hearing, session or any proceedings before it, including cases in which a person willfully fails or refuses, without just cause, to comply with a summon,


subpoena or subpoena duces tecum legally issued by the Commission or any of its Division, being present at a hearing, proceeding, session or investigation, refused to be sworn as a witness or to answer questions or to furnish information when lawfully required to do so.

SEC. 25. Decisions of the Commission. – Decisions of the Commission en banc shall be appealable to the Court of Appeals as hereinafter provided. The appeal shall not stay the order, ruling or decision sought to be reviewed, unless the Court of Appeals shall direct otherwise upon such terms and conditions it may be deem just.

SEC. 26. Appeal to the Court of Appeals. – Any party who has actively participated in the proceedings before the Commission and is adversely affected by a binding ruling, order, or resolution, decision, judgment, rule or regulation promulgation after notice and hearing by the Commission sitting en banc, may appeal, by means of a notice of appeal and a veri�ied petition for review served upon the Commission and other parties who actively participated in the proceedings, to the Court of Appeals within thirty (30) days from receipt thereof, on the ground that the appealed action of the Commission:

(a) is arbitrary to constitutional rights, power, privilege, or immunity;(b) is contrary to constitutional rights, power, privilege, or immunity;(c) is in excess of statutory jurisdiction, authority, or limitations, or is contrary to law;(d) is without observance of the procedure required by law; and(e) is not supported by substantial evidence.

The Commission shall be included as a party respondent to the case and shall be represented by its own legal staff.

SEC. 27. Appeal to the Supreme Court. – A decision of the Court of Appeals may be appealed to the Supreme Court in the manner and on the grounds prescribed by the Rules of Court.

SEC. 28. Reception of Additional Evidence. – Any party in the appellate proceedings may apply for leave to the Court of Appeals or the Supreme Court, to adduce additional evidence before the Commission. The Court may, under such terms and conditions as it may prescribe, order the Commission to receive such additional evidence upon showing that it is material and there are reasonable grounds for the failure to present said evidence in the proceedings before the Commission. The Commission, sitting en banc, may modify its �indings as to the facts, or make new �indings, by reason of the additional evidence taken, and it shall �ile with the appellate court such modi�ied or new �indings and its recommendations for the af�irmation, modi�ication, or setting aside of the appealed binding ruling, order, resolution, decision, judgment, rule or regulation.

SEC. 29. Writ of Execution. – Upon the �inality of its binding ruling, order, resolution, decision, judgment, or rule or regulation, (collectivity, “Decision”), the Commission may issue a writ of execution to enforce its decision and the payment of the administrative �ines provided in the preceding sections.


SEC. 30. Violation by Corporation, Partnership, Association, and Other Entity. – Whenever a corporation, partnership, association, �irm or other entity, whether domestic or foreign, shall commit any of the acts declared to be unlawful under this Act, the Chairperson of the Board of Directors, the President, the General Manager of the corporation, the general partners of a partnership, and the of�icers and employees directly responsible, shall be jointly and severally liable with the �irm for the �ine imposed therein.

Should the offense be committed by a foreign corporation licensed to do business in the Philippines, the person or persons directly responsible in the Philippines for the management and operation therefore, shall be liable. In addition, its license to do business in the Philippines shall be cancelled.

It shall not be a defense for the Chairperson of the Board of Directors, the President or the General Manager of a corporation or the general partners of a partnership, or the persons responsible for the management operation of a foreign corporation licensed to do business in the Philippines, that the person was unaware of the violation, unless, it can be established to the satisfaction of the court that even with the exercise of due diligence and proper supervision, the person could not have avoided or prevented the violation.

Any agreement between an of�icer, partner or any other of�icer and a corporation or partnership whereby the latter directly or indirectly agrees to assume, satisfy or indemnify, in whole or in part, the �ine of civil obligation imposed under this Act of such corporate of�icer, partner, manager or other of�icer found guilty of violating this Act, shall be void.

SEC. 31. Alien Violations. – If the person violating any provision of this Act is a foreigner, said person shall, in addition to the other penalties imposed herein, be deported after service of sentence without need of any further proceedings.

SEC. 32. Essential Commodities. – If the violations involves the trade or movement of prime commodities such as rice, corn, sugar, chicken, pork, beef, �ish, vegetables, and other articles or commodities or prime or basic necessity as declared by the appropriate government agency, through publication, the �ine imposed by the Commission or the courts, as the case may be shall automatically be tripled and the offender shall pay such threefold �ine.

SEC. 33 Private Action. – Regardless of the status or pendency of any proceedings, any �irm that suffers injury by reason of any violation of this Act may institute a separate and independent civil action, irrespective of the amount involved in the controversy against the defendants and shall recover treble damages sustained, the costs of suit and reasonable attorney’s fees: Provided, however, That no �iling fees shall be collected: Provided, further, That �iling fees shall constitute a �irst lien in the award of damages.

SEC. 34. Effect of Final Judgment. – Any �inal judgment in a civil or criminal action brought by the Commission on behalf of the people of the Philippines under this Act to the effect that a defendant has violated any or all of the provisions of this Act shall be res judicata as to any


claim by any person noti�ies the court having jurisdiction of the case brought. Provided, That such person noti�ies the court having jurisdiction of the case within the period given by the court: Provided, further, That such period shall not be less than ninety (90) days.

It shall be prima facie evidence against such defendant in any civil action brought by any other party under this Act as to all matters respecting which said judgment would be an estoppel as between the parties concerned.

SEC. 35. Distribution of Damages Recovered. – The damages recovered in a civil action under Section 20 of this Act shall be distributed in the following manner: (1) as determined and to be authorized by the Court having jurisdiction of the case; (2) ten percent (10%) of the total amount of damages shall accrue to the Commission and/or regulatory agency to be used exclusively in the enforcement of this Act; and (3) the remainder of which total amount of damages shall be deemed a civil penalty by the Court and shall be deposited to the National Treasury as part of the general fund of the government: Provided, That any distribution procedure adopted by the Court shall give preference to individual consumers and afford each interested person a reasonable opportunity to secure his appropriate portion of the net damages obtained.

SEC. 36. Measurement of Damages. – Damages may be proved and assessed in the aggregate by statistical or sampling methods, by the computation of illegal overcharges, or by such other reasonable system of estimating aggregate damages as the court in its discretion may permit without the necessity of separately proving the individual claim of, or amount of damage to, persons on whose behalf the suit was brought.

SEC. 37. Immunity from Suit. The Commission and the Staff of the Commission shall not be subject to any action, claim or demand in connection with any act done or omitted by them in the performance of their duties and exercise of their powers, except for those acts and omissions done in evident bad faith or gross negligence.

The Commissioner and Staff of the Commission for all costs and expenses reasonably incurred by such persons on connection with any civil or criminal actions, suits or proceedings to which they may be or made a party by reason of the performance of their duties or exercise of their powers, unless they are �inally adjudged in such actions or proceedings to be liable for evident bad faith or gross negligence.

CHAPTER VIOTHER PROVISIONS

SEC. 38. Statute of Limitations. – Any civil or criminal action to enforce any cause of action arising from a violation of any provision of this Act shall be forever barred unless commenced within �ive (5) years after the cause of action accrues. The running of the statute of limitation shall be suspended during the pendency of any proceeding.


The cause of action begins to run when the plaintiff suffers injury to its business or property: Provided, That when the damage suffered by the plaintiff is too speculative to prove, the cause of action does not accrue until the damage becomes probable: Provided, however, That if the plaintiff ’s anti-competitive act may restart the limitation period or when a plaintiff reasonably fails to uncover a cause or action that was fraudulently concealed by a defendant.

SEC. 39. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and Preliminary Mandatory Injunctions. – Except for the Supreme Court, no other court shall issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the regulatory agency in the exercise of its duties or functions: Provided, That, this prohibition shall apply in all cases, disputes or controversies instituted by a private party, including, but not limited to, cases �iled by regulated �irms or those claiming to have rights through such �irms: Provided, however, That, this prohibition shall not apply when the matter is of extreme urgency involving a constitutional issue, such that the non-issuance of a temporary restraining order will result in grave injustice and irreparable injury to the public: Provided, further, That, the applicant shall �ile a bond, in an amount to be �ixed by the Court, but in no case shall it be less than half of the imposable �ines provided for under Section 11 of this Act: Provided, �inally, That in the event that the court �inally decides that the applicant was not entitled to the relief applied for, the bond shall accrue in favor of the regulatory agency.

Any temporary restraining order, preliminary injunction or preliminary mandatory injunction issued in violation of this section is void and no force and effect. Any judge who violates this section shall be penalized by suspension of at least one (1) year without pay in addition to other criminal, civil or administrative penalties.

The Supreme Court may designate regional trial courts to act as commissioners with the sole function of receiving facts of the case of the case involving the acts of the regulatory agency. The designated Regional Trial Court shall, within thirty (30) days from the date of receipt of the referral, forward its �indings of facts to the Supreme Court for appropriate action.

SEC. 40. Intellectual Property Rights. – The implementation of the provisions of this Act shall be without prejudice to the rights, liabilities and remedies under Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines: Provided, That, the exercise of intellectual property rights shall not in any way be used to justify violations of this Act.

SEC. 41. Trade Associations. – Nothing contained in this Act shall be construed to prohibit the existence and operation of trade associations organized to promote quality standards and safety issues: Provided, That, these associations shall not in any way be used to justify any violation of this Act.


SEC. 42. Congressional Oversight Committee. – To oversee the implementation of this Act, there shall be created a Congressional Oversight Committee of Fair Competition (COCFC) to be composed of the Chairpersons of the Senate Committees on Trade and Commerce, Economic Affairs, and Finance; the Chairpersons of the House Representatives Committees on Trade and Industry, Economics Affairs and Appropriations; and two members each from the Senate and the House of Representatives who shall be designated by the Senate President and the Speaker of the House of Representatives: Provided, That one of the two Senators and one of the two House of Members shall be nominated by the respective Minority Leaders of the Senate and the House of Representatives. The Congressional Oversight Committee shall be chaired by the Chairpersons of the Senate Committee on Trade and Commerce and the House of Representatives Committee on Trade and Industry. The Vice-Chair of the Congressional Oversight Committee shall be jointly held by the Chairpersons of the Senate Committee of Economic Affairs and the House of Representatives Committee on Economics Affairs.

The Secretariat of the Congressional Oversight Committee on Fair Competition shall be drawn from the existing personnel of the Senate and House of Representatives committees comprising the Congressional Oversight Committee.

CHAPTER VIIFINAL PROVISIONS

SEC. 43. Implementing Rules and Regulations. – The Commission shall prepare the necessary rules and regulations within one hundred twenty (120) days from the effectivity of this Act: Provided, That, where the same would apply to an industry or a sub-sector of industry that is subject to the jurisdiction of a regulatory agency, the Commission shall, in preparing the guidelines, consult with the concerned regulatory agency and stakeholders: Provided, further, That the Commission may revise such guidelines as it deems necessary: Provided, however, That such revised guidelines only take effect following its publication in two newspapers of general circulation.

SEC. 44. Appropriations. – The amount necessary to implement the provisions of this Act shall be included in the annual General Appropriations Act. However, for the initial budgetary requirements of the Commission, the amount of One hundred million pesos (P100,000,000.00) is hereby appropriated: Provided, That all moneys recovered or charges or composition sums collected under this Act, other than �inancial penalties, shall be paid into and form part of the moneys of the Commission.

SEC. 45. Transitory Provision. – For the purpose of ensuring that the Commission is organized within the mandated period of one hundred eighty (180) days after the approval of this Act, an Inter-Agency Task Force shall be created and composed of the following agencies:


a) Agencies which will provide administrative support to the Commission:

i. Of�ice of the President, to be represented by the Executive Secretary with the Dep-uty Executive Secretary for Legal Affairs as alternate;

ii. Department of Budget and Management, to be represented by the Secretary with the Undersecretary in charge of organization of new of�ices and position classi�ica-tion as alternate;

b) Agencies with currently perform functions germane or are related to the purposes of the Commission:

i. Tariff Commission, to be represented by the Chairperson and with an Associate Commissioner permanently designated as alternate;

ii. Department of Trade and Industry, to be represented by the Secretary with the Director of the Bureau of Trade Regulation and Consumer Protection as alter-nate representative;

iii. Department of Justice, to be represented by the Secretary with an of�icer hold-ing at least an Assistant Secretary rank as alternate.

The Task Force shall also meet in Executive Session with all the agency heads to deliberate on possible appointees for the position of Chairperson and Associate Commissioners of the Commission for submission to and consideration of the President of the Philippines.

The Task Force shall also commence the coordinated advocacy for this Act within ninety (90) days from the effectivity thereof. It shall also implement a broad-based consultation on inputs for the Implementing Rules and Regulations of this Act which must be completed with one hundred twenty (120) days from the effectivity of this Act. The report on the consultations shall be submitted to the Commission within �ifteen (15) days from its establishment a copy of which will be furnished to the Congressional Oversight Committee of Fair Competition.

SEC. 46. - Suppletory Application. - For purposes of this Act, the Revised Penal Code, as amended, and other applicable laws shall be applied in a suppletory character.

SEC. 47. – Separability Clause. – If any clause, sentence, section or part of this Act shall be adjudged by a court of competent jurisdiction to be invalid, such judgment shall not affect, impair or invalidate the remainder of this Act, but shall be con�ined in its operation to the clause, sentence, paragraph, section, or part thereof directly involved in the controversy.

SEC. 48. Repealing Clause. – The following laws, insofar as they are inconsistent with any of the provisions of this Act, are hereby repealed, amended or otherwise modi�ied accordingly:


(a) Sec. 5 (3) of Republic Act. No. 7581 or The Price Act; (b) Sec. 5 (f) of Republic Act No. 7925 of The Public Telecommunications Policy Act; (c) Sec. 11 (a) and (b) of Republic Act No. 8479 or the Downstream Oil Act;(d) Sec. 45 of Republic Act No. 9136 or The Electric Power Industry Reform Act;(e) Sec. 13 of Republic Act No. 9295 or The Domestic Shipping Development Act;(f) Sec. 24 and 25 of Republic Act No. 9502 or The University-Accessible Cheaper and

Quality Medicines Act. Provided, That on case of con�lict between this Act and such provisions of existing competition laws and regulations, the provisions of this Act shall prevail.

SEC. 49. Effectivity Clause. – This Act shall take effect �ifteen (15) days following its publication in the Of�icial Gazette and in at least two (2) national newspapers of general circulation: Provided, however, That in order to allow affected parties time to renegotiate agreements or restructure their business to comply with the competition law, the penal provisions under Section 12 of this Act, except for those already prohibited under the Revised Penal Code, shall be imposed one (1) year after the effectivity of the implementing Rules and Regulations of this Act.

Approved,


FIFTEENTH CONGRESS OF THE REPUBLIC ) OF THE PHILIPPINES ) First Regular Session )

SENATES. B. No. 1

Introduced by Senator JUAN PONCE ENRILE

EXPLANATORY NOTE

Our people have been victims to big business. It behooves the Senate to provide protection to our people against price manipulators.

In a volatile economic situation such as that which we are experiencing now, it is not very dif�icult to imagine how arti�icial prices in one or two commodities is able to directly or indirectly raise the prices of related goods and services.

In Article XII, Section 19, our Constitution provides:

“Section 19. 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.”

As proof of the importance of this Constitutional mandate, Section 22 of the same article encourages the promulgation of legislation that would impose civil and criminal sanctions against those who circumvent or negate this principle. Hence, Section 22 of the Constitution provides:

“Section 22. Acts which circumvent or negate any of the provisions of this Article shall be considered inimical to the national interest and subject to criminal and civil sanctions, as may be provided by law.”

Although previous legislations have been passed pursuant to this Constitutional mandate, the increased deviousness and complexity of schemes in perpetuating monopolies in the free market landscape necessitates an equally sophisticated legislation that would effectively address this concern.

ANNEXES


Generally, this bill penalizes combinations or conspiracies in restraint of trade and all forms of arti�icial machinations that will injure, destroy or prevent free market competition.

For these reasons, the passage of this bill is earnestly recommended.

JUAN PONCE ENRILE Senator


FIFTEENTH CONGRESS OF THE )REPUBLIC OF THE PHILIPPINES )First Regular Session )

SENATES.B.NO: 1

Introduced by Senator Juan Ponce Enrile

AN ACT PENALIZING UNFAIR TRADE AND ANTI-COMPETITIVE PRACTICES IN RESTRAINT OF TRADE, UNFAIR COMPETITION, ABUSE OF DOMINANT POWER, STRENGTHENING THE POWERS OF REGULATORY AUTHORITIES AND APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress assembled:

CHAPTER 1TITLE AND DECLARATION OF POLICY

SECTION 1. Title. – This Act shall be known and cited as the “Competition Act of 2010.”

SEC. 2. Declaration of Policy. - Pursuant to the constitutional mandate that the State shall regulate or prohibit monopolies when the public interest so requires and that no combinations in restraint of trade or unfair competition shall be allowed, the State shall:

(a) promote and enhance economic ef�iciency and free and full competition in trade, industry and all commercial economic activities;

(b) prevent the concentration of economic power in a few persons who threaten to con-trol the production, trade, or industry in order to sti�le competition, distort, manipulate or constrict the discipline of free markets, increase market prices in the Philippines; and

(c) penalize all forms of unfair trade, anti-competitive conduct and combinations in re-straint of trade, with the objective of protecting and advancing consumer welfare,

CHAPTER 2SCOPE AND APPLICATION, DEFINITION OF TERMS

SEC. 3. Scope and Application. - This Act shall be enforceable within the territory of the Republic of the Philippines and shall apply to all areas of trade, industry and commercial economic activity. It shall likewise be applicable to international trade having direct, substantial and reasonably forseeable effects in trade, industry or commerce in the Republic of the Philippines including those that result from acts done outside the Republic of the Philippines.


The Act shall apply to: (a) all �irms as de�ined hereunder and all their commercial agree-ments, actions or transactions involving goods, services or intellectual property; and, (b) all natural persons who, acting in their capacity as owner, manager or employee of a �irm, shall authorize, engage or aid in the commission of restrictive practices prohibited under this Act.

SEC. 4. De�inition of Terms. – As used in this Act, the following terms shall be de�ined as:

(a) Agreements shall refer to any type or form of arrangement, understanding, undertak-ing or concerted action, whether formal or informal, written or oral;

(b) Cartel shall mean a combination of �irms, providing goods in relevant markets, acting or joined together to obtain a shared monopoly to control production, sale and price, or to obtain control in any particular industry or commodity, or a group of �irms that agree to restrict trade to their mutual bene�it, which may or may not be of an international scale. It shall also refer to �irms or section of �irms having common interest designed to promote the exchange of knowledge resulting from scienti�ic and technical research, exchange of patent rights and standardization of products among themselves with the intent of preventing, restricting or distoring competition;

(c) Competition shall mean the process by which economic agents, acting independently in a market, limit each other’s ability to control the prevailing conditions in the market;

(d) Control shall refer to at least twenty percent (20%) ownership, directly or indirectly, of a �irm or a group of �irms by another �irm;

(e) Firms shall include any person, natural or juridical, partnership, combination or association in any form, whether incorporated or not, domestic or foreign, including those owned or controlled by the government, engaged directly or indirectly in any economic activity: Provided, That, two �irms, one of which is controlled by the other, shall be treated as one �irm: Provided, further, That two or more �irms that are controlled by a single �irm shall be treated as one �irm;

(f) Goods shall include all types of goods and services;

(g) Market shall refer to a place or venue for commercial activity, which may extend beyond the borders of the Republic of the Philippines, where articles are bought or sold. It shall also refer to the geographical or economic extent of commercial demand;

(h) Monopoly shall mean a privilege or undue advantage of one or more �irms, consisting in the exclusive right to carry on a particular business or trade, and/or manufacture a particular product, article or object of trade, commerce or industry. It is a form of market structure in which one or only a few �irms dominate the total sales of a product or service;


(i) Monopoly Power or Dominant Position shall refer to a situation where a �irm, either by itself or acting in collusion with other �irms, is in a position to control a relevant market for the sale of a particular good or service by �ixing its prices, excluding competitor �irm, or controlling the market in a speci�ic geographical area; and

(j) Relevant Market shall refer to the line of commerce in which competition has been restrained. It shall also refer to the geographic area involved, including all reasonably substitutable goods, and all nearby competitors, to which consumers could turn if the restraint or abuse results in the signi�icant increase in prices.

CHAPTER 3PROHIBITED ACTS

SEC. 5. Cartelization. – It shall be unlawful for �irms providing goods in relevant markets to join together to monopolize, or to control production in a particular industry or commodity, the sale and price of such good, and to agree to restrict trade for their mutual bene�it, which may or may not be on an international scale. This shall also include an association by agreement of �irms or sections of �irms having common interests designed to promote the interchange of knowledge resulting from scienti�ic and technical researches, exchange of patent rights and standardization of products among themselves with the intent of preventing, restricting or distorting competition.

Restrictive agreements resulting from cartel-like behavior of �irms, in any form, are hereby per se deemed illegal. These shall include, but not limited to, the following:

(a) Agreements to �ix selling price of goods or other terms of sale;(b) Agreements to limit supply or output;(c) Agreements to divide the market, whether by volume of sales or purchase or by

territory, by type of goods sold, by customers or sellers, or by any other means;(d) Agreements to exclude or limit dealings with particular suppliers or sellers from

supplying or selling goods, or customers from acquiring or buying goods;(e) Agreements applying dissimilar conditions to equivalent transactions with other

parties, thereby placing them at a competitive disadvantage; and(f) Agreements making the transactions in particular goods dependent upon other

conditions which have no connection with the subject of the transaction.

There shall be a prima facie case for the existence of a cartel if and when the Department of Trade and Industry (DTI) or concerned regulatory agency �inds that two or more persons or �irms that are ostensibly competing for the same relevant market and actually perform uniform or complementary acts among themselves which tend to bring about arti�icial and unreasonable increase, decrease or �ixing in the price of any goods or when they simultaneously and unreasonably increase, decrease or �ix the prices of their seemingly competing goods thereby lessening competition in the relevant market among themselves.


SEC. 6. Monopolization. – It shall be unlawful for any �irm to willfully or knowingly acquire and maintain its market power by excluding competitors from any part of trade, industry or commerce as distinguished from natural growth or development of a �irm as a consequence of a superior product, business acumen or historic accident: Provided, That, a �irm that has at least �ifty percent (50%) of the relevant market, or �irms up to three (3) in number has at least seventy percent (70%) of the relevant market, as found and certi�ied by the Department of Trade and Industry or the concerned regulatory agency shall be deemed a monopoly or in a dominant position.

SEC. 7. Abuse of Monopoly Power or Dominant Position. – It shall be unlawful for one or more �irms with monopoly power or in dominant position within relevant markets to abuse their dominant position, by engaging in unfair methods of competition, or in unfair or deceptive trade practices, or entering into combinations in the form of trust or otherwise, or conspiracy, with the purpose and effect to prevent, restrict, or distort competition. Abusive agreements such as, but not limited to, any of the following, shall be deemed to fall under the crime of abuse of monopoly power or market power by one in dominant position:

(a) Predatory Behavior Towards Competitors - Any agreement, including, but not limited to, selling goods at a very low price with the intent of driving competitors out of the market, or creating barriers to entry;

(b) Price Fixing - Any agreement among competitors to raise, suppress, �ix 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 �irmly, 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 or cartel or lessening competition.

(c) Bid Rigging - Any agreement to �ix price 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.

In determining whether there is price �ixing or bid rigging, the following circumstances may be considered:

(1) generally, any considered evidence that two sellers of similar goods have agreed to set the price of their goods, to sell only a certain amount of their goods, or to sell only to a limited number of buyers or consumers;

(2) a drastic change in prices of goods and services involving more than one seller of similar goods of different brands, particularly if the changes in prices take place in equal amount and about the same time;

(3) a seller refusing to sell based on an agreement with a competitor;


(4) the same �irm has repeatedly been the low bidder who has been awarded contracts for a certain service or a particular bidder seems to win bids on a �ixed-rotation;

(5) there is an unusual and unexplainable difference between the winning bid and all other bids; and

(6) the same bidder bids substantially higher on some bids than on others, and there is no logical cost reason to explain the difference.

(d) Limitation and Control of Markets - Any agreement to limit or control production, markets, technical development, or investment with the purpose and effect of creating a monopoly or cartel, or lessening competition.

(e) Market Allocation - Any agreement to divide the market, whether by volume of sales or purchase or by territory, by type of goods sold, by customers or sellers or by any other means, with the purpose and effect of creating a monopoly or cartel, or lessening competition.

(f) Arrangements to Share Markets or Sources of Supply - Any agreement to share markets or sources of supply of raw materials, with the purpose and effect of creating a monopoly or cartel, or lessening competition.

(g) Price Discrimination - Any agreement prescribing or charging, directly or indirectly, discriminatory pricing terms or conditions in the supply or purchase of goods of like grade and quality with the purpose and effect of creating a monopoly or cartel, or substantially lessening competition: Provided, That nothing contained herein shall be construed to prohibit permissible price differentials unless the same shall have the effect of preventing, restricting or distorting competition: Provided, further, That for the purpose of this section, the following shall be considered permissible price differentials:

(1) Socialized Pricing - Socialized pricing for the less fortunate sector of the economy;(2) Volume Discounts - Price differentials which re�lect an allowance for differences in

the cost of manufacture, sale, or delivery resulting from differing methods or quantities in which the goods are sold or delivered to the purchasers;

(3) Competitive Pricing - A price differential or other terms of sale 111 response to the competitive price of payments, services or facilities furnished by a competitor;

(4) Bona�ide Selection of Customers - The selection of customers on bona �ide transaction; and

(5) Price Differentials Due to Changing Market Conditions or Marketability of Goods – Price changes from time to time in response to changing conditions affecting the market or the marketability of the goods concerned such as, but not limited to, actual or imminent deterioration of perishable goods, obsolescence of seasonal goods, distress sales under court process, or sale on good faith in discontinuance of business.

(h) Exclusivity Arrangement - Any agreement imposing restrictions on the lease or contract for sale or trade of goods concerning where, to whom, or in what forms goods may


be sold or traded, such as, but not limited to, �ixing prices, or giving preferential discounts, or rebate upon such price, or imposing conditions not to deal with competing �irms, where the purpose of such agreement is to lessen competition: Provided, That nothing contained herein shall prohibit or render unlawful permissible franchising, licensing or exclusive distributorship agreements.

(i) Tie-In Arrangements - Any agreement making the supply of particular goods dependent upon the purchase or lease of other goods from the supplier or his consignee, where the purpose and effect of such sale or lease or such condition is to substantially lessen competition or to create a monopoly or cartel.

(j) Boycott - Any concerted refusal to sell or conspiracy not to sell or to stop doing business on the part of the suppliers of any goods, unless for a legitimate purpose, such as, but not limited to:

(l) Defaulting Borrowers - refusal by one or more credit institutions to extend loans to defaulting debtors;

(2) Defaulting Buyers - refusal by one or more manufacturers or sellers to sell on credit t defaulting customers; and Violators of Intellectual Property Rights - refusal by manufacturers or sellers to have any commercial dealings with one or more �irms who violate the intellectual property rights of the owners of patents, copyrights, trademarks and other intellectual property.

SEC. 8. Other Unfair Competition Practices. – The following acts shall be unlawful acts of unfair competition and shall be punishable under this Act:

(a) Distribution of false or misleading information which is capable of harming the business interests of another �irm;

(b) Distribution of false or misleading information to consumers, including the distribution of information lacking a reasonable basis related to price, character, method or place of production, properties, suitability for use, or of quality goods; and

(c) Unauthorized receipt, use, or dissemination of con�idential scienti�ic, technical, production, business or trade information.

CHAPTER 4FINES AND PENALTIES

SEC. 9. Penalties. – Without prejudice to the violation of other laws, any �irm that shall be found to have violated Sections 5, 6, 7 and 8 of this Act, or any combination thereof, shall, for each and every violation, be punished by a �ine of not less than Ten million pesos (Php 10,000,000.00) and not exceeding Fifty million pesos (Php50,OOO,OOO.OO) if a natural


person; by a �ine of not less than Two hundred �ifty million pesos (Php250,000,000.00) but not exceeding Seven hundred �ifty million pesos (Php750,000,000.OO) if a �irm, and by imprisonment not exceeding ten (10) years, or both, at the discretion of the court. In the alternative, a �ine shall be imposed in the amount double the gross proceeds gained by the violator or double the gross loss suffered by the plaintiffs

SEC. 10. Imposition of Fines by Regulatory Agency. – Notwithstanding any provisions of law, regulatory agencies shall, in the conduct of their functions or duties, have the power to impose �ines in the amount not less than One hundred thousand pesos (PhplOO,OOO.OO) and not exceeding Five million pesos (Php5,OOO,000.OO), if a natural person; and not less than Five million pesos (Php5,OOO,OOO.00) and not exceeding Fifty million pesos (Php50,000,000.00) if a �irm for each violation of or non compliance with an order or notice of the regulatory agency. Ten percent (10%) of such �ines shall accrue to the budget of the regulatory agency for the exclusive use in the enforcement of this Act.

CHAPTER 5ENFORCEMENT

SEC. 11. Preliminary Inquiry. – The Department of Justice (DOJ), in coordination with the Department of Trade and Industry (DTI), other regulatory and/or appropriate government agency, shall motu propio, upon the �iling of a veri�ied complaint by an interested party or upon referral by the concerned regulatory agency, initiate a preliminary inquiry for the enforcement of this Act based on reasonable grounds.

SEC. 12. Powers of Concerned Regulatory Agencies. – Notwithstanding the provisions of the preceding section, the exercise of regulatory powers by different government agencies over an industry or a sub-sector of an industry shall be cumulative and shall not be construed in any way as derogating from the power and authority of the concerned agency. The government agencies shall cooperate and coordinate with one another in the exercise of their powers in order to prevent overlap, to share con�idential information, or for other effective measures.

SEC. 13. Power to Investigate and to Enforce Orders and Resolutions. – The DOJ shall conduct preliminary inquiries by administering oaths, issuing subpoena duces tecum and summoning witnesses, and commissioning consultants or experts. It shall determine if any provision of this Act has been violated, enforce its orders and carry out its resolutions by making use of any available means, provisional or otherwise, under existing laws and procedures including the power to punish for contempt and to impose �ines.

SEC. 14. Self-incrimination. – Pursuant to the preceding section, a person subject of any preliminary inquiry or investigation by the DOJ shall produce the speci�ied document or information when so required by written notice: Provided, That no person shall be excused from disclosing any document or information to the inquiring of�icer on the ground that


the disclosure of the information or document may be incriminating: Provided, further, That such document or information produced by the person subject of investigation shall not be admissible as evidence against him in criminal proceedings: Provided, �inally, That such document or information shall be admissible in evidence in civil proceedings including those arising from or in connection to the implementation of this Act.

SEC. 15. Privileged Communication Exclusion. – Nothing in the preceding section shall compel the disclosure of privileged communication: Provided, That the person who refuses to disclose the information or produce the document or other material required by the inquiring of�icer in relation to the preliminary inquiry being conducted shall nevertheless be obliged to give the name and address of the �irm to whom, or by whom, or on whose behalf, such privileged communication was made.

SEC. 16. Con�identiality of Information. – Any document or information submitted by �irms, as determined and marked con�idential by the DOJ, relevant to any investigation being conducted pursuant to this Act shall not, in any manner, be directly or indirectly disclosed, published, transferred, copied, or disseminated.

Any violation of this section shall be imposed the penalty of imprisonment ranging from three (3) to six (6) years and a �ine of not less than One hundred thousand pesos (Php100,000.00) but not more than Five hundred thousand pesos (Php500,000.00).

SEC. 17. Immunity from Suit. - Any person or �irm which cooperates or furnishes any information, document or data to the DOJ before or during the conduct of the preliminary inquiry that constitutes material evidence as determined by the DOJ under this Act shall be immune from any suit or charge including from affected parties and third parties: Provided, further, That any person or �irm which cooperates or furnishes information, document or data to the DOJ in connection to an investigation being conducted shall not be subjected to any form of reprisal or discrimination: Provided, furthermore, That such reprisal or discrimination shall be considered a violation of this Act and subjected to the penalties provided for under Section 9: Provided, �inally, That, notwithstanding the provisions of Section 21 hereof, the �irm which cooperates with the DOJ in its investigation shall be entitled to a reward equivalent to twenty percent (20%) of any monies paid by the �irm subject of the inquiry, or the monetary relief recovered from court action.

Nothing in this section shall preclude prosecution for persons and �irms who reported to the Department of Justice with malicious information, data and falsi�ied documents which is damaging to the business and integrity of the persons and �irms tmder inquiry. Such act shall likewise be considered as an unfair trade practice punishable under this Act.

SEC. 18. Termination and Action on Preliminary Inquiry. – The Department of Justice, after considering the statements made, or documents or articles produced, in the course of an inquiry condncted by it, shall terminate the preliminary inquiry by issuing a resolution


ordering its closure if no violation or infringement of this Act is found; or by issuing a nolo contendere resolution; or issuing a resolution to, singly or cumulatively, (a) impose penalties in the range provided under Section 9 hereof; (b) order sanctions which may be imposed by the regulatory and/or appropriate government agency; (c) order the rectification of certain acts or omissions; or (d) order the restitution to the affected parties.

When determined by the facts and circumstances, the DOJ shall institute a civil action by class suit in the name of the Republic of the Philippines, as parens patriae, on behalf of persons residing in the Philippines, to secure treble damages for any injury sustained by such persons by reason of any violation of this Act, plus the cost of suit and reasonable attorney’s fee.

If the evidence so warrants, the DO] shall institute criminal cases for violation of this Act or relevant laws: Provided, That, for criminal prosecution of violations of this Act, no preliminary investigation shall be required, neither shall a petition for review be made: Provided, further. That any appeal shall be instituted to a division of the Court of Appeals exclusively handling competition and consumer protection laws.

SEC. 19. Nolo Contendere Resolution. – Any firm under inquiry under the provisions of this Act may submit to a nolo contendere resolution at any time before the termination of the preliminary inquiry by: a) the payment of an amount within the range of penalties provided for under Section 9; b) by entering into an undertaking to effectively stop and rectify the acts complained against, make restitution to the affected parties, whether or not the parties are plaintiffs or witnesses; and, c) by submitting regular compliance reports as may be directed: Provided, That, ten percent (10%) of the amounts paid under this section shall equitably accrue to the DOJ and/or regulatory government agencies involved in the inquiry: Provided, further, That a nolo contendere resolution shall not bar any inquiry for the same or similar acts if continued or repeated.

SEC. 20. Private Action. – Regardless of the status or pendency of any proceedings, any firm that suffers injury by reason of any violation of this Act may institute a separate and independent civil action, irrespective of the amount involved in the controversy against the defendant or defendants and shall recover treble damages sustained, the costs of suit and reasonable attorney’s fees: Provided, however, That no filing fees shall be collected: Provided, further, That filing fees shall constitute a first lien in the award of damages.

SEC. 21. Effect of Final Judgment. – Any final judgment in a civil or criminal action brought by the DOJ on behalf of the people of the Philippines under this Act to the effect that a defendant has violated any or all of the provisions of this Act shall be res judicata as to any claim by any person on whose behalf such action was brought: Provided, That such person notifies the court having jurisdiction of the case within the period given by the court: Provided, further, That such period shall not be less than ninety (90) days.


It shall be prima facie evidence against such defendant in any civil action brought by any other party against such defendant under this Act as to all matters respecting which said judgment would be an estoppel as between the parties concerned.

SEC. 22. Distribution of Damages Recovered. – The damages recovered in a civil action under Section 19 of this Act shall be distributed in the following manner: (1) as determined and to be authorized by the Court having jurisdiction of the case; (2) ten percent (10%) of the total amount of damages shall accrue to the DOJ andlor regulatory agency to be used exclusively in the enforcement of this Act; and, (3) the remainder of which total amount of damages shall be deemed a civil penalty by the Court and shall be deposited to the National Treasury as part of the general fund of the government: Provided, That any distribution procedure adopted by the Court shall give preference to individual consumers and afford each person having an interest a reasonable opportunity to secure his appropriate portion of the net damages obtained.

SEC. 23. Measurement of Damages. – Damages may be proved and assessed in the aggregate by statistical or sampling methods, by the computation of illegal overcharges, or by such other reasonable system of estimating aggregate damages as the court in its discretion may permit without the necessity of separately proving the individual claim, of, or amount of damage to, persons on whose behalf the suit was brought.

CHAPTER 6OTHER PROVISIONS

SEC. 24. Statute of Limitations. – Any civil or criminal action to enforce any cause of action arising from a violation of any provision of this Act shall be forever barred unless commenced within �ive (5) years after the cause of action accrues. The running of the statute of limitation shall be suspended during the pendency of any proceeding.

The cause of action begins to run when the plaintiff suffers injury to its business or property: Provided, That when the damage suffered by the plaintiff is too speculative to prove, the cause of action does not accrue until the damage becomes probable: Provided, however, That if the plaintiffs injury is the result of the continuing violations of this Act, each independent anti-competitive act may restart the limitation period or when a plaintiff reasonably fails to uncover a cause or action that was fraudulently concealed by a defendant.

SEC. 25. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and Preliminary Mandatory Injunctions. – Except for the Supreme Court, no other court shall issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the regulatory agency in the exercise of its duties or functions: Provided, That, this prohibition shall apply in all cases, disputes or controversies instituted by a private party, including, but not limited to, cases �iled by regulated �irms or those claiming to have rights through such �irms: Provided, however, That, this prohibition shall not apply


when the matter is of extreme urgency involving a constitutional issue, such that the non-issuance of a temporary restraining order will result in grave injustice and irreparable injury to the public: Provided, further, That, the applicant shall �ile a bond, in an amount to be �ixed by the Court, but in no case shall it be less than half of the imposable �ines provided for under Section 10 of this Act: Provided, �inally, That in the event that the court �inally decides that the applicant was not entitled to the relief applied for, the bond shall accrue in favour of the regulatory agency.

Any temporary restraining order, preliminary injunction or preliminary mandatory injunction issued in violation of this section is void and of no force and effect. Any judge who violates this section shall be penalized by suspension of at least one (l) year without pay in addition to other criminal, civil or administrative penalties.

The Supreme Court may designate regional trial courts to act as commissioners with the solet function of receiving facts of the case involving the acts of the regulatory agency. The designated Regional Trial Court shall, within thirty (30) days from the date of receipt of the referral, forward its �indings of facts to the Supreme Court for appropriate action.

SEC. 26. Intellectual Property Rights. – The implementation of the provisions of this Act shall be without prejudice to the rights, liabilities and remedies under Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines: Provided, That, the exercise of intellectual property rights shall not in any way be used to justify violations of this Act.

SEC. 27. Trade Associations. – Nothing contained in this Act shall be construed to prohibit the existence and operation of trade associations organized to promote quality standards and safety issues: Provided, That, these associations shall not in any way be used to justify any violation of this Act.

Sec. 28. Guidelines. – The DOJ, in consultation with the DTI, shall prepare the necessary guidelines for the implementation of this Act: Provided, That, where the guidelines would apply to an industry or a sub-sector of industry that is subject to the jurisdiction of a regulatory agency, the DOJ shall, in preparing the guidelines, consult with the concerned regulatory agency: Provided, further, That the DOJ may revise such guidelines it deems necessary: Provided, however, That such revised guidelines shall only take effect following its publication in two newspapers of general circulation.

Sec. 29. Appropriations. – The sum of One hundred million pesos (Php 100,000,000.00) for the initial year of implementation of this Act is hereby appropriated. Thereafter such amounts as may be necessary for the continuous implementation of this Act shall be included in the Annual General Appropriations Act (GAA).

Sec. 30. Separability Clause. – If any clause, sentence, section or part of this Act shall be adjudged by a court of competent jurisdiction to be invalid, such judgment shall not affect,


impair or invalidate the remainder of this Act, but shall be con�ined in its operation to the clause, sentence, paragraph, section, or part thereof directly involved in the controversy.

SEC. 31. Suppletory Application. - For purposes of this Act, the Revised Penal Code, as amended, and other applicable laws shall be applied in a suppletory character.

SEC. 32. Repealing Clause. – All provisions of law, orders, decrees, executive orders, including rules and regulations or parts thereof, which are contrary to or inconsistent with the provisions of this Act are hereby repealed or modi�ied accordingly: Provided, however, That all existing competition laws and regulations shall remain in full force and in effect: Provided, further, That in case of con�lict between this Act and such provisions of existing competition laws and regulations, the provisions of this Act shall prevail.

SEC. 33. Effectivity Clause. – This Act shall take effect �ifteen (15) days following its publication in the Of�icial Gazette or in at least two (2) national newspapers of general circulation.

Approved,

About CMFR

The formation of the Center for Media Freedom and Responsibility (CMFR) addresses one of the critical concerns confronting the Philippines after People Power toppled the Marcos dic-tatorship in February 1986. That concern calls attention to the power of media and the role of the free press in the development of Philippine democracy.

All over the world, press freedom has been found to be essential to the democratic system. Effective participatory government is possible only when it can count on a well-informed so-ciety where individuals freely exchange ideas, where public debate and discussion arise from knowledge and understanding of national affairs.

That freedom involves not only media professionals but also the public served by the me-dia—public of�icials, the private sector, civil society groups, readers, viewers, and listeners—who receive information and are part of the cycle of public communication. But freedom of the press, like all liberties, has its limits, for the simple reason that it is vulnerable to abuse.

Democratic recovery confronts serious obstacles on the media front. The press and the me-dia need to exert special efforts to measure up as a collective vehicle of information, as an in-strument for clarifying complex issues and dilemmas of development that the public should understand.

Against this background, CMFR was organized in 1989 as a private, non-stock, non-pro�it organization involving the different sectors of society. Its programs uphold press freedom, promote public journalism, and ecourage journalistic excellence.

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