Prelims Argu

7/27/2019 Prelims Argu

1/64

Bookman old style

12

1.5 spacing

3 pages

1 all around

Quote

Competition law

Monopoly meaning

History/background

Proposed bills

Pro

Anti

Own opinion (anti/pro)

Conclusion (theres always two side of a coin; its up to the congress and senate)

Quotes

Competition brings out the best in products and the worst in people." - David

Sarnoff, Pioneer of American Commercial Radio and TV

The early bird gets the worm, but the second mouse gets the cheese.

Willie Nelson

Play to win, not "not to lose".

Dondi Scumaci

Law is made by the winner to preserve victory over the loser.

Toba Beta,Betelgeuse Incident

Nobody's going to win all the time. On the highway of life you can't always be in

the fast lane.

Haruki Murakami,What I Talk About When I Talk About Running
http://www.goodreads.com/author/show/32577.Willie_Nelsonhttp://www.goodreads.com/author/show/32577.Willie_Nelsonhttp://www.goodreads.com/author/show/32577.Willie_Nelsonhttp://www.goodreads.com/author/show/944328.Dondi_Scumacihttp://www.goodreads.com/author/show/944328.Dondi_Scumacihttp://www.goodreads.com/author/show/944328.Dondi_Scumacihttp://www.goodreads.com/author/show/3336353.Toba_Betahttp://www.goodreads.com/author/show/3336353.Toba_Betahttp://www.goodreads.com/author/show/3336353.Toba_Betahttp://www.goodreads.com/work/quotes/10096252http://www.goodreads.com/work/quotes/10096252http://www.goodreads.com/work/quotes/10096252http://www.goodreads.com/author/show/3354.Haruki_Murakamihttp://www.goodreads.com/author/show/3354.Haruki_Murakamihttp://www.goodreads.com/author/show/3354.Haruki_Murakamihttp://www.goodreads.com/work/quotes/2475030http://www.goodreads.com/work/quotes/2475030http://www.goodreads.com/work/quotes/2475030http://www.goodreads.com/work/quotes/2475030http://www.goodreads.com/author/show/3354.Haruki_Murakamihttp://www.goodreads.com/work/quotes/10096252http://www.goodreads.com/author/show/3336353.Toba_Betahttp://www.goodreads.com/author/show/944328.Dondi_Scumacihttp://www.goodreads.com/author/show/32577.Willie_Nelson


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Competition is a rude yet effective motivation.

Toba Beta,Master of Stupidity

Companies arent families. Theyre battlefields in a civil war.

Charles Duhigg,The Power of Habit: Why We Do What We Do in Life and

Business

Competition is not only the basis of protection to the consumer, but is the

incentive to progress. Herbert hoover

Competition creates better products, alliances create better companies.

Brian Graham quotes

The higher we soar, the smaller we appear to those who cannot fly.

-Friedrich Wilhelm Nietzsche

They that stand high, have many blasts to shake them;

And if they fall, they dash themselves to pieces.

Shakespeare.

Monopolies are bad for business. Monopolies tell companies, especially small

ones, that they cannot aspire to be as big; the latters destiny is to swallowed

whole or in part by the rampaging monopolist beast.

All we have now is a hodge-podge of disparate laws that offer no stiff protection to

Filipinos in the face of new and reemerging monopolies, or abusive companies, in thetelecom sector and beyond. Addressing this situation will send a message to domestic

and international investors that the Philippines offers fair opportunities, and does not

play favorites, especially to big, moneyed and influential businessmen.

Globally, regionally and nationally, there is a continuing rejection of all sorts of business

monopolies. Opposing monopolies is not bad for business. The opposite is true.
http://www.goodreads.com/author/show/3336353.Toba_Betahttp://www.goodreads.com/author/show/3336353.Toba_Betahttp://www.goodreads.com/author/show/3336353.Toba_Betahttp://www.goodreads.com/work/quotes/13409671http://www.goodreads.com/work/quotes/13409671http://www.goodreads.com/work/quotes/13409671http://www.goodreads.com/author/show/5201530.Charles_Duhigghttp://www.goodreads.com/author/show/5201530.Charles_Duhigghttp://www.goodreads.com/author/show/5201530.Charles_Duhigghttp://www.goodreads.com/work/quotes/17624817http://www.goodreads.com/work/quotes/17624817http://www.goodreads.com/work/quotes/17624817http://www.goodreads.com/work/quotes/17624817http://thinkexist.com/quotation/competition_is_not_only_the_basis_of_protection/209058.htmlhttp://thinkexist.com/quotation/competition_is_not_only_the_basis_of_protection/209058.htmlhttp://thinkexist.com/quotation/competition_is_not_only_the_basis_of_protection/209058.htmlhttp://thinkexist.com/quotation/competition_creates_better_products-alliances/199554.htmlhttp://thinkexist.com/quotation/competition_creates_better_products-alliances/199554.htmlhttp://thinkexist.com/quotation/competition_creates_better_products-alliances/199554.htmlhttp://thinkexist.com/quotes/brian_graham/http://thinkexist.com/quotes/brian_graham/http://boardofwisdom.com/togo/?viewid=1010&search=Friedrich+Wilhelm+Nietzschehttp://boardofwisdom.com/togo/?viewid=1010&search=Friedrich+Wilhelm+Nietzschehttp://boardofwisdom.com/togo/?viewid=1010&search=Friedrich+Wilhelm+Nietzschehttp://boardofwisdom.com/togo/?viewid=1010&search=Friedrich+Wilhelm+Nietzschehttp://thinkexist.com/quotes/brian_graham/http://thinkexist.com/quotation/competition_creates_better_products-alliances/199554.htmlhttp://thinkexist.com/quotation/competition_is_not_only_the_basis_of_protection/209058.htmlhttp://thinkexist.com/quotation/competition_is_not_only_the_basis_of_protection/209058.htmlhttp://www.goodreads.com/work/quotes/17624817http://www.goodreads.com/work/quotes/17624817http://www.goodreads.com/author/show/5201530.Charles_Duhigghttp://www.goodreads.com/work/quotes/13409671http://www.goodreads.com/author/show/3336353.Toba_Beta


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A monopoly captures the market not by providing superior products but by the

capricious use of the monopolist of his immense resources and prerogatives to

monopolize the market.

Arranza strongly believed that prosecuting monopolies and combinations that

restraint trade would necessarily promote competition, level the playing field in themarket, and ultimately inure to the benefit of the consumers.

Senate Bill No. 1 or the "Competition Act of 2010" is anchored on the constitutionalmandate that "the State shall regulate or prohibit monopolies when the public interestso requires and that no combinations in restraint of trade or unfair competition shallbe allowed."

Competition Law and Policy

The Philippines should be fertile ground for a national competition law and policy. Thecountry experienced nearly a half-century of rule under the legal and political

traditions of the United States. The Philippines Constitution recognizes theindispensable role of the private sector (and) encourages private enterprise. Itauthorizes the state to regulate or prohibit monopolies when the public interest sorequires, and disallows any combinations in restraint of trade or unfair competition.Yet the Philippines has neither a comprehensive law of competition nor a specializedenforcement entity.

Some Philippine laws and government entities are vested with authority to challengetrade restraints, and these laws provide remedies. There is, however, no substantivePhilippine jurisprudence on competition because virtually no cases have been litigated.Litigation of cases also would be difficult because the law does not define, explain, orestablish criteria for what constitutes the elements of a violation. While there arespecific sectors that have made headway to open competition, there is no centralgovernment authority responsible for competition law or policy. At present, a nationalcompetition lawor an agency to enforce itis not a high priority with the currentadministration or with Philippine lawmakers. Consequently, political will is insufficientto push forward one of the several existing draft competition laws pending in thePhilippine House and Senate. Moreover, there is no widespread public constituency forcompetition law, and little public understanding of its potential benefits to consumersand new business entrants. This apparent domestic complacency contrasts with thePhilippines' sensitivity about its role as a regional economic and political influence. Inthe ASEAN trade organization, where the common goal is a single market, thePhilippines is falling behind as other member states that have adopted competition

laws are developing a body of law and experience.

Since President Aquino mentioned a new antitrust law in his first State of the NationAddress, much work has been done on the antitrust bills filed in Congress.Legislative hearings have been concluded and proponents say that after decades ofwaiting (since the Eighth Congress, Im told), we will finally have a unified, up-to-dateand comprehensive antitrust or competition law.What are antitrust laws? Antitrust or competition laws are laws that regulate andmaintain market competition by prohibiting or regulating anti-competitive behavior.


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Three acts that antitrust laws normally seek to prohibit are monopolies, cartel-likebehavior and abuse of dominant market position.In an economic sense, antitrust laws are in place to promote a freer market and moreopen trade, which will result in substantial efficiency and welfare gains for everyone.A hot topicThe proposed acquisition of Digitel by PLDT has sparked even more interest on an

antitrust law for the country. Globe, a competitor, argues that the transaction will leadto PLDT controlling close to 70 percent of the market and will eventually lead to higherprices and rates. However, PLDT and Digitel maintain that the deal will result incontinued unli benefits, to use telco lingo, for consumers.Aside from the PLDT-Digitel deal, Nestl has its own antitrust controversy: Allegedly, ithas been engaging in predatory pricing to drive out competition from the market.Expectedly, Nestl contends that its products are not the cheapest in the market andthat competition among lower-priced products remains intense.Justice Secretary Leila de Lima also had reportedly ordered a review of antitrust casesfiled against Fraport AG (Fraport), a German company, and its local partner PhilippineInternational Air Terminals Co. (Piatco), in connection with the Ninoy AquinoInternational Airport Terminal 3.Interestingly, perhaps in an attempt to respond to these antitrust controversies, thePresident issued Executive Order No. 45, which created an Office of the CompetitionAuthority in the Department of Justice, to help enforce our antitrust laws.Current lawThis is not to say that our country has no antitrust laws at all. From myriad sourcesof law, one can find snippets of an anti-competition framework that serves as somesort of precedent for the current bill.Foremost is Article XII, Section 19, of the Constitution, which mandates the State toregulate or prohibit monopolies when required by public interest and at all times toprohibit combinations in restraint of trade and other unfair competition practices.There are implementing pieces of legislation, like the Revised Penal Code which, in

Article 186, punishes monopolies and combinations in restraint of trade.Meanwhile, the Civil Code under Article 28 authorizes the collection of damagesarising from unfair competition in agricultural, industrial or commercial enterprises orin labor.There are other laws that attempt to penalize anti-competition activities. However,with very few exceptions, many of these laws have but skeletal provisions and do notprovide meaningful guidance to the market on how our competition policy should beimplemented.Salient featuresWhat is clear from the bills (at least after the Senate and House committee hearings) isthat they do not prohibit monopolies per se, perhaps taking their cue from theConstitution and our Asean neighbors.

At the core of the bills are more detailed provisions on anti-competitive agreements(like price-fixing, market allocation), abuse of dominant position (like predatorypricing), anti-competitive mergers and more detailed enforcement mechanism.Unlike its Senate counterpart, the House version proposes to create a five-manPhilippine Competition Commission as a single venue for anti-competition issues.Similarly, the House version proposes to adopt non-adversarial methods ofenforcement, like a request for binding ruling to make the law more business-friendly.Anti-antitrust law


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There are, of course, those who are against an antitrust law. Some economists arguethat the need for an antitrust law stems from the wrongful notion that an unhinderedand unregulated market leads to coercive monopolies. They assert that no unfairmonopoly can ever be created by means of free trade in a free market economy.Surely, there are policy issues yet to be decided in the plenary sessions of both Housesbefore an antitrust law becomes part of our statute books.

A basic policy issue, of course, is whether we really need a new antitrust law. If so, dowe adopt the American system or the European model? What acts should be outlawedand what type of enforcement mechanism should be adopted considering the stage ofour economic development? Should the law go for a separate competition commissionor just create an office in the DoJ? How should the competition authority interfacewith other government agencies, like the Department of Energy, Department of Tradeand the Securities and Exchange Commission on antitrust-related matters that, bylaw, are currently under their jurisdiction?The big question is, whether a new antitrust law will finally see the light of day or willthe bills suffer the same fate as the preceding measures?Your guess is as good as mine.

Anti-trust law needed to curb emerging monopoliespaper

October 7, 2010Congress was urged yesterday to enact new legislation that will police monopolisticpractices that stifle free competition and hurt consumers in the face of the wave ofmergers and consolidations now sweeping the country and across the globe.Forensic Law and Policy Strategies Inc. (Forensic Solutions), which is headed byformer Justice Secretary Alberto Agra, said in its latest policy paper that an anti-trustlaw is necessary to ensure unfettered competition in Philippine industries and positionFilipino consumers as the supreme arbiter in a free market that yields the highestquality of good and services at the lowest prices possible.In its 10th policy paper, Forensic Solutions cited the urgency for new anti-trustlegislation at a time when the current trend is toward the privatization andderegulation of vital industries, with governments getting off the back of business andceding state control over economic activities.Mergers and acquisitions, which are tools for expansion and restructuring, have

resulted in even greater market power being concentrated in fewer corporations, saidForensic Solutions in the policy paper titled Competition Laws in the Face of the

Merger Wave. This environment is fertile ground for restrictive business practices

that prevent true and fair competition.The absence of legislation particularly addressing the effects of mergers and

consolidations on market competition leaves the Philippines ill-equipped to police

abuses and anti-competitive practices, the paper said.It noted that subsidiaries of multinationals that may behave competitively inindustrialized countries where strong anti-trust regulations are in place might be moreinclined to indulge in anti-competitive practices in developing countries where thereare few such regulations.In the Philippine setting, such corporate consolidations include the 2006 takeover byBanco de Oro of Equitable PCI Bank, which is the largest bank merger in local history;the preceding takeover by Equitable Bank of the larger PCI Bank in 1999; the takeover


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by the Bank of the Philippine Islands of the Far East Bank and Trust Co. and DBSBank Philippines in 2000.Another big merger was that of Philip Morris International and Fortune Tobacco Co.and the absorption by Aboitiz Transport Systems Corp. of its subsidiarythe logisticsfirm Zoom in Packages.

Following the global merger of Merck & Co. Inc. and Schering-Plough Corp., their localcounterparts MSD and Schering Plough (Philippines) also began the process ofintegrating their respective businesses in the country, Agra and Raola said.Other notable domestic mergers were those of Aboitiz, William Lines, and GothongLines, all shipping companies, into WG&A Super Ferry; the acquisition by PLST of thelocal Internet service provider Sequel Net; and the Lopez conglomerate consisting ofABS-CBN, Bayantel, Meralco, Sky Cable and Sun Cable, Manila Water Co. and thenewspaper Manila Chronicle.The policy paper noted that mergers and corporate consolidations in rich countrieshave a significant effect on developing economies like the Philippines, where the localsubsidiaries of foreign corporate giants could engage in similar moves, leaving localconsumers unprotected from such anti-competition practices.

It noted for instance the possible cartelization of the pharmaceuticals sector onaccount of the mergers of US drugs manufacturers.A 1999 study by Ajit Singh and Rahul Dhumale of the University of Cambridgehighlighted, they said, the importance of a competition policy in developing countriesin the face of the global merger wave.This University of Cambridge study shows that the large incidence of cross-bordertakeovers and mergers has a competition-reducing effect, which developing countrieswill find difficult to stop, said Agra and Raola.They noted that in response to these developments in the corporate world, two billshave been filed by Senate President Juan Ponce Enrile and Sen. Miriam DefensorSantiago that aim to penalize questionable mergers.

Enriles Senate Bill 123 penalizes combinations or conspiracies in restraint of tradeand all forms of artificial machinations that will injure, destroy or prevent free marketcompetition.The Enrile bill also prohibits stock or asset acquisitions, grant of proxies or votingrights, and board membership in two or more corporations that have the effect ofsubstantially reducing competition or tending to create a monopoly.On the other hand, Santiagos Senate Bill 1835 amends certain provisions of the

Revised Penal Code against monopolies by prescribing criminal penalties and fines oncorporation of persons taking part in any monopoly or combinations of practices inrestraint of trade.Agra and Raola noted, however, that Congress needs to address other equally

important concerns regarding mergers and consolidations.They recommended, for one, a law calling for the review of proposed mergers andconsolidations before they are approved to check against abuses.A threshold should be set to determine when and under what conditions an

enterprise is said to be enjoying a dominant market position, they noted.Arrangements that do not comply with fair competition guidelines and those that

significantly limit competition should not be allowed.


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They said the SEC should be allowed to take remedial action, and impose penaltiesand sanctions against existing merged corporations that are engaging in anti-competitive practices.Agra and Raola also proposed the simplification of the current legal mechanismsavailable to interested parties for them to obtain relief or file injunctions against

questionable mergers without going through a protracted litigation process.In its paper on corporate mergers and consolidations, Forensic Solutions noted thatanti-trust legislation is not new in the Philippine legal landscape as the Constitutionand local jurisprudence already address such concerns.It noted that the Supreme Court has already issued several rulings on mergers,including the landmark Gokongwei vs SEC case, in which the high tribunal statedthat the inclusion of John Gokongwei, who owns a substantial stake in the foodcompany CFC-Robina, in the board of its rival San Miguel Corp., could lead to an anti-competitive situation.The Revised Penal Code, Civil Code, Corporation Code, Anti-Monopoly Law (RepublicAct 3247), Revised Securities Act, Intellectual Property Code, Price Act, Consumer Act,Downstream Oil Deregulation Act, Anti-Dumping Act, and Electric Power Industry

Reform Act also contain various provisions against restraint of trade, cartels and otheranti-competition practices.Daily Tribune

RECOMMENDATIONS FOR

PHILIPPINE ANTI-TRUST POLICY AND REGULATION

1

Anthony Amunategui Abad

Introduction

Various economic reforms were introduced in the Philippines through substantial

trade and investment liberalization, deregulation and privatization during the

administration of President Fidel V. Ramos (1992-1998). These reforms have led to

the

realization that freer trade and open markets are good for Filipinos in general.

Substantial

efficiency and welfare gains were brought about by increased competition from new

products and services. Inversely, the Philippines' long and sad history of

underdevelopment can actually be traced to a lack of competition in its economy.

With this important realization, the Ramos administration adopted a policy of


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introducing more competition-enhancing measures, such as the further lowering of

trade

and investment barriers and the reform of certain economic regulations. Throughout

the

years, awareness of the need for a new and comprehensive framework for anti-trustpolicy

and regulation has increased within the Philippines, and the central role played by

antitrust policy in economic reform measures for enhancing competition is now

recognized.

There have been a number of draft bills

2

for a proposed anti-trust or competition

law filed in Congress, reflecting a growing appreciation by Philippine political leaders

of

their importance. These bills could form the nucleus of a truly comprehensive

framework

for anti-trust policy and regulation. It is unfortunate that these bills did not form part

of

the priority measures under the term of President Joseph E. Estrada (1998-2001), the

administration succeeding Ramos, and have therefore languished as pending

legislation.

The same holds true until now under the present administration headed by President

Gloria Macapagal-Arroyo.

3

To avoid committing these past mistakes of omission , a thorough study of the

Philippines current approach to sustaining a market-oriented economy and regulating

economic activity, will be needed. Reviewing existing economic laws and regulations

and

testing their effectiveness as tools for promoting economic efficiency and public welfare

through competition should also be done. These analyses can then form the basis for


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crafting a framework for anti-trust policy and regulation, and probably the direction

that

the Philippines should be headed in to become truly pro-competition.

1

Paper presented during the conference entitled Policies to Strengthen Productivity in

the Philippines, sponsored by the

Asia-Europe Meeting (ASEM) Trust Fund, Asian Institute of Management Policy Center,

Foreign Investment Advisory

Service, Philippines Institute of Development Studies and the World Bank, June 27-28,

2005

2

See Appendix 2 for such bills.

3

2001 to date Recommendations for Philippine Anti-Trust Policy and Regulations

page 2 of 53

Rationale and Scope

Since competition policy is a rather broad topic encompassing various aspects of

functioning market economies, this paper will focus on specific key areas. The

emphasis

of this paper is on the legal and regulatory aspects of competition policy, particularly

the

framework for effective enforcement of competition in all sectors of the Philippine

economy. This is important because of its bearing on the actual implementation of

competition policy in the country.

The scope of work and objectives of this paper are:

1.

2.


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3.

4.

1.

2.

to review existing anti-trust laws and regulations

to examine the effectiveness and adequacy of these laws and regulations

to examine how well these laws conform with international rules

to suggest recommendations for reform.

The paper will have three major components:

Survey of Existing Anti-Trust Laws and Regulations in the Philippines

The concept of anti-trust regulation is not exactly new to the Philippines.

Apparently, old anti-trust provisions of U.S. laws found their way into the

Philippine Constitution, the Revised Penal Code and Civil Code. Anti-trust

enforcement is also implicitly vested in various regulatory agencies and

bodies. This section of the paper surveys the existing laws and regulations

that are deemed as constituting an anti-trust and/or competition policy

framework for the Philippines.

Analysis of Existing Anti-Trust Regulation in the Philippines

Knowing the existing laws and regulations for anti-trust enforcement at the

disposal of the Philippine government, what is then the actual

effectiveness of these laws and regulations in promoting competition in the

Philippine economy? This section analyzes the state of anti-trust regulation

in this country and examines the government's thrust on implementing, and

capability to implement, anti-trust laws and regulations. It studies the

general regulatory structure in place, and identifies a number of the

regulators and institutions involved in the anti-trust process. How have


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they managed to control the behavior of the players in various industries

and sectors? How have they affected the structure of markets in the

Philippine economy? What are the major problem areas? Recommendations for

Philippine Anti-Trust Policy and Regulations

page 3 of 53

3.

Recommendations for a New Legal and Regulatory Framework for AntiTrust

Enforcement in the Philippines

This section recommends a new anti-trust policy and regulatory

framework for the Philippines. Given the Philippines' long history of

protectionism and over-regulation, market distortions are rampant in the

economy despite the existence of basic anti-trust laws and regulations.

Therefore, there is still a need to propose a more effective framework for

anti-trust regulation in this country. Such a framework should first lay

down the basic policy objectives and principles, and then spell out the

basic structure for regulation. This section also suggests certain basic

provisions for new anti-trust legislation and mechanisms for more

effective enforcement.

This section also covers draft bills on the proposed anti-trust or

competition law of the Philippines.

Survey of Existing Anti-Trust Laws and Regulations in the Philippines

Anti-trust laws and regulations are not new to the Philippines. Apparently, oldanti-trust provisions of U.S. laws found their way into the Philippine Constitution, the

Revised Penal Code and Civil Code. Anti-trust enforcement is also implicitly vested in

various regulatory agencies and bodies. This section of the paper surveys laws and


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regulations that are deemed as the existing anti-trust and/or competition policy

framework

of the Philippines.

The Constitution

Under the Constitution,

4

the State is mandated to regulate or prohibit monopolies,

combinations in restraint of trade and other unfair competition practices, for the sake

of

public interest. These provisions were based on the U.S. Sherman Act.

Note that the Constitution does not prohibit monopolies per se. Monopolies are

not illegal in themselves, as opposed to combinations in restraint of trade and other

unfair

competition practices. The latter are to be prohibited without exception.

However, since the Constitution does not define what would constitute unlawful

monopolies, or combinations in restraint of trade or unfair competition practices,

separate

legislation and/or case laws are the bases for making such definitions.

Criminal Law

Republic Act (R.A.)No. 3815 as amended, otherwise known as the Revised Penal

Code, punishes anti-competitive behavior that is criminal in nature. Article 186

defines

4

Constitution, Article XII, Section 19 Recommendations for Philippine Anti-Trust Policy

and Regulations

page 4 of 53

and penalizes monopolies and combinations in restraint of trade while Article 187

provides penalties.


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Combinations in restraint of trade are defined as:

1.

2.

3.

1.

2.

Any agreement, whether in the form of a contract or conspiracy or

combination in the form of trust or otherwise, resulting in the restraint of

trade or commerce

Preventing by artificial means free competition in the market

Any manner of combination, conspiracy, or agreement between or among

manufacturers, producers, processors, or importers of any merchandise or

object of commerce, or with any other persons, for the purpose of making

transactions prejudicial to lawful commerce, or increasing the market price

of such merchandise or object of commerce or of any other article in the

manufacture, production, or processing, or importation of which such

merchandise or object of commerce is used.

Illegal monopolies are defined as:

Monopolizing any merchandise or object of trade or commerce

Combining with any other person or persons to monopolize any

merchandise or object of trade or commerce,

in order to alter the price thereof by spreading false rumors or making use of any

other artifice to restrain free competition in the market.

The Revised Penal Code also penalizes other frauds in commerce and industry

such as falsely marking gold and silver articles and altering trademarks


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5

.

Civil Law

R.A. No. 386 (1949) as amended, otherwise known as the Civil Code of the

Philippines and which took effect in August 1950, allows the collection of damages

arising from unfair competition in agricultural, commercial, or industrial enterprises

or in

labor

6

It also allows the collection of damages arising from abuse in the exercise of

rights and in the performance of duties

7

, e.g., abuse of a dominant market position by a

monopolist.

Peculiarly enough, the Civil Code does not define unfair competition and merely

lists the means by which unfair competition can be committed: force, intimidation,

deceit,

machination, or any other unjust, oppressive or highhanded method.

Treble damages for civil liability arising from anti-competitive behavior is

allowed under R.A. No. 165, otherwise known as An Act to Prohibit Monopolies and

Combinations in Restraint of Trade.

5

Republic Act No. 166 (1947)6

Article 28

7

Article 19 Recommendations for Philippine Anti-Trust Policy and Regulations


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page 5 of 53

Special Laws

Special laws specifically address some unfair competition practices.

1. R.A. No. 9136 (2001), otherwise known as the Electric Power Industry

Reforms Act of 2001

This Act provides for the restructuring of the electric power industry,

including the privatization of the assets of the National Power Corporation,

the transition to the desired competitive structure, and the definition of the

responsibilities of the various government agencies and private entities.

2. R.A. No. 8752 (1999), otherwise known as the Anti-Dumping Act of 1999

This law was passed to protect Filipino enterprises against unfair foreign

competition and trade practices.

3. R.A. No. 8479 (1998), otherwise known as the Downstream Oil Industry

Deregulation Act of 1998

This law led to the liberalization and deregulation of the downstream oil

industry to ensure a competitive market to encourage fair pricing, adequate

and continuous supply of environmentally-clean and high-quality

petroleum products.

4.

5.

R.A. No. 8293 (1997), otherwise known as the Intellectual Property Code

of the Philippines

This law provides for the protection of patents

8

, trademarks


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9

, and

copyrights

10

and the corresponding penalties for infringement.

Batas Pambansa Blg. 68 (1980), otherwise known as the Corporation Code

of the Philippines

This law provides for the rules regarding mergers and consolidations

11

and

the acquisition of all or substantially all the assets or shares of stock of

corporations

12

. It must be noted, however, that the Corporation Code does

not address the problem of the probable abuse of a dominant position when

horizontal mergers occur, e.g. merger of three shipping lines - Aboitiz,

William Lines, and Gothong Lines into the WGA Super Ferry, or in case

of vertical acquisitions, e.g. the acquisition by Metro Pacific Corporation,

owner of cellular phone company, SMART Communications, Inc., of

Philippine Long Distance Telephone Company, along with Sequel Net (an

Internet service provider), and Home Cable.

8

Rep. Act No. 8293 (1997), at Part II

9

Id., at Part III

10


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Id., at Part IV

11

Title IX

12

Title IV, Sections 40 and 42 Recommendations for Philippine Anti-Trust Policy and

Regulations

page 6 of 53

6.

7.

Batas Pambansa Big. 178 (1982) as amended, otherwise known as the

Revised Securities Act

This law complements the Corporation Code. It prohibits and penalizes the

manipulation of security prices and insider trading

13

.

R.A. 7581 (1991), otherwise known as the Price Act, and R.A. 7394

(1932), otherwise known as the Consumer Act of the Philippines

Consumer welfare and protection is also an important aspect of

competition policy. In this area, the significant laws are the Price Act and

the Consumer Act of the Philippines.

The Price Act defines and identifies illegal acts of price manipulation such

as, hoarding, profiteering and cartels. Through price controls and

mandated ceiling mechanisms, the Price Act also seeks to stabilize the

prices of basic commodities and prescribes measures against abusive price

increases during emergencies and other critical situations.


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The Consumer Act of the Philippines provides for consumer product

quality and safety standards. It also covers deceptive, unfair, and

unconscionable sales acts and practices (including weight and measures,

product and service warranties), consumer credit transactions, and

penalties for violations of the statute.

Jurisprudence

Since the law itself is not clear, case law or judicial interpretation is particularly

important in defining unlawful monopolies, combinations in restraint of trade, and

unfair

competition practices.

The Supreme Court has affirmed the need to "... recast our laws on trust,

monopolies, oligopolies, cartels and combinations injurious to public welfareto

restore competition where it has disappeared and to preserve it where it still exists. In

a

word, we need to perpetuate competition as a system to regulate the economy and

achieve

global product quality.?

14

Defining Unfair Competition. To date, there have been only two cases decided

by the Supreme Court defining monopoly. In the case of Gokongwei, Jr. v Securities

and

Exchange Commission, et al.,

15

the Supreme Court narrowly defined monopoly as

13

Id. at secs. 26 and 30. Sec. 15 also provides for the revocation of registration for

engaging in fraudulent


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acts in connection with the sale of securities. Sec. 27 prohibits manipulative and

deceptive devices, sec. 28

artificial measures of price control, and sec. 29 fraudulent transactions.

14

Tatad v The Secretary of the Department of Energy and The Secretary of the

Department of Finance, etc,

G.R. Nos. 14360 and 17867, Decision En Banc dated 03 December 1997 on the

Motion for

Reconsideration, citing the State of the Nation Address of President Fidel V. Ramos,

3rd Session of the

Ninth Congress, 25 July 1994.

15

G.R. No. L-45911, 89 SCRA 339 (1979) Recommendations for Philippine Anti-Trust

Policy and Regulations

page 7 of 53

"unified tactics with regard to price." Further, it apparently considered a monopoly as

undesirable in itself, and not the abuse of a monopoly or dominant position.

"A 'monopoly' embraces any combination the tendency of which is to prevent

competition in the broad and general sense, or to control prices to the detriment of

the public. In short, it is the concentration of business in the hands of a few. The

material consideration in determining its existence is not that prices are raised and

competition actually excluded, but that power exists to raise prices or exclude

competition when desired. Further, it must be understood that the idea of a

monopoly is now understood to include a condition produced by the mere act of

individuals. Its dominant thought is the notion of exclusivity or unity, or the

suppression of competition by the unification of interest or management, or it may


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be through agreement and concert of action. It is, in brief, unified tactics with

regard to price."

In the Gokongwei case, John Gokongwei, Jr. acquired enough shares of stock to

get himself elected to the board of directors of San Miguel Beer Corporation (SMBC), a

beer manufacturer. However, Mr. Gokongwei also controlled a rival beer

manufacturing

company, Asia Brewery, Inc. The Supreme Court held Mr. Gokongwei's action as

constituting unfair competition.

In the Tatad case,

16

the Supreme Court, in its original decision, held that:

"A monopoly is a privilege or peculiar advantage vested in one or more persons or

companies, consisting in the exclusive right or power to carry on a particular

business or trade, manufacture a particular article, or control the sale or the whole

supply of a particular commodity. It is a form of market structure in which one or

a few firms dominate the total sales of a product or service." (Citations omitted)

In the Gokongwei case, it was likewise held that a monopoly can be achieved

through the "suppression of competition by the unification of interest or management,

or

it may be thru agreement and concert of action.

17

Thus, even mergers and

consolidations of companies, where these could lead to unfair competition, can beregulated.

The Tatad case

18

also defined combinations in restraint of trade and differentiated


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a combination from a monopoly:

"On the other hand, a combination in restraint of trade is an agreement or

understanding between two or more persons, in the form of a contract, trust, pool,

holding company, or other form of association, for the purpose of unduly

restricting competition, monopolizing trade and commerce in a certain

commodity, controlling its production, distribution and price, or otherwise

interfering with the freedom of trade without statutory authority. Combination in

restrain of trade refers to the means while monopoly refers to the end." (Citations

omitted}

COMPETITION LAW AND POLICY

A. DEFINITION OF TERMS

1. What is Competition Law?

Competition law refers to the framework of rules and regulations designed tofoster the competitive environment in a national economy. It consists of measuresintended to promote a more competitive environment as well as enactments designedto prevent a reduction in competition.

2. What is Competition Policy?

Competition policy, on the other hand, broadly refers to all laws, governmentpolicies and regulations aimed at establishing competition and maintaining thesame. It includes measures intended to promote, advance and ensure competitivemarket conditions by the removal of control, as well as to redress anti-competitiveresults of public and private restrictive practices.

B. GOALS/OBJECTIVES OF COMPETITION POLICY

3. What are the Goals of Competition Policy?

To promote economic efficiency, which comprises three (3) components

o Productive efficiencyFirms use the least cost production techniques to producemaximum possible goods and services from given inputs

o Allocative efficiencyResources are channeled to those sectors wherethey are best utilized in order to produce goods and services that arevalued most highly by consumers


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o Dynamic efficiency Firms strive to maintain their competitivenessby investing in Research and Development, innovation, marketing andmanagement to keep abreast of the changes in technology, preferencesand products.

To correct market failure

To enhance consumer welfare

To achieve higher economic growth

To promote competitiveness in both and domestic and foreign market

4. Basic Market Structure in which the degree of competition affects prices,output and profits. These are:

Perfect Competition - This is an ideal or extreme form of competition.It occurs when a market consists of many firms selling an identical product tomany buyers. Any firm that wishes to do so can enter or leave the market.

Monopoly - A market with a sole supplier of a good, service orresource for which there is no close substitute. In addition, there are barriers toentry of new firms.

Natural Monopoly - A natural monopoly arises from natural barriersto entry (such as a unique source of supply) or situation in which one firm can

supply the entire market at a lower price than two or more firms could offer.

Monopolistic Competition - Similar to perfect competition, but ratherthan firms producing identical products, these are many firms competingagainst each other by producing similar but slightly different products.

Oligopoly - One characterized by a small number of firms wherequantity sold by any one firm is influenced by its choice in respect of strategicvariables ( such as prices, product design, research and development,advertising, and sales locations) and these choices are strongly influenced byother firms in the industry.

C. MARKET FAILURE

5. What is market failure?

Occurs when the market is unable to achieve an efficient and equitableallocation of resources.

6. What are the sources of market failure?


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I. Public Goods a public good is one, which if provided to oneconsumer, is freely available to all consumers.

Ex. - Street lighting, parks, roads, etc,. This means no private firm is ableto make a profit from providing such goods. Therefore, government shouldensure that such goods are provided at the socially desired level.

II. Income Distribution The market will not necessarily ensureequitable distribution of incomes. This may motivate government tointroduce policies to redistribute wealth through measures, i.e., incometaxes and social security benefits.

III. Monopoly The operations of monopoly or natural monopoly oftenresult in misuse of market power and inefficient allocation of resources,which reduce community welfare. For this reason, governments generallyregulate monopoly and enforce laws preventing cartels. This type is amajor rationale for a comprehensive competition policy.

IV. Externalities An externality arises when an activity confers abenefit (like the benefit of education or immunization) or imposes a cost(pollution) on a third party, without the cost or benefit being included inthe market price of that activity.

V. Information Asymmetries In theory, buyers and sellers in acompetitive market have complete knowledge about a product or servicecharacteristics and quality. Information asymmetries between producers andconsumers can lead to market failure and reduce community welfare.

D. COMPETITIVE CONDUCT RULES

7. What are the competitive conduct rules?

Competitive Conduct - describes the decision-making processes of firms in acompetitive market, where price, quantity and profit choices are dictated by overallmarket conditions and these are not unduly influenced by the actions of one or morelarge firms. In essence, competitive conduct describes firm behavior under conditionsof perfect competition.

Competitive Conduct Rules are governments response to the absence ofperfect competition in a market. Their primary objective should be to protect or

enhance the competitive process in markets where it is only partially operating.

Competitive Processcompetitive conduct that reduce costs and prices, whichis driven by impersonal and diffuse market forces and the threat of entry ofadditional suppliers. It results in efficient resource allocation and pricing, which canbe attained in open, dynamic markets resembling perfect competition.


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Competitive conduct rules codify what is acceptable behavior in aneconomy. Typically, such rules prohibit arrangements that can beconstrued as anti-competitive, in that they either:

Increase the power of firms within a market to the extent thatthis inhibits competitive conduct;

Prohibit existing competitors or potential market entrants fromeffectively competing.

8. What are anti-competitive agreements?

Anti-Competitive Outcomes or AgreementsThe Hilmer Report(Hilmer 1993) identifies several market outcomes or agreementswhich can be viewed as anti-competitive. These are:

Horizontal Agreements agreement that exists between firms(suppliers or consumers) at the same level of production chain. This isoften referred to as collusion. Collusion usually takes the form of anagreement on price, such a combination of firms provides them with adegree ofpricing power, or in other words, the ability to at leastinfluence the price of a good.

Vertical AgreementsIt may vary where firms at different stagesof the production chain collude. In most cases, vertical collusion occursbetween suppliers and users of business inputs. This may relate toprice or other matters (i.e. quotas, exclusive dealings, etc.,)

Misuse of Market Power This type of anti-competitive conductoccurs when a single firm in a dominant position in a market misusesits market power. EX: predatory pricing

Mergers and acquisitions - Mergers and acquisitions can constituteinappropriate market behavior where they lead to market outcomes ofthe typed described above. It is unlikely that a move towards increasingmarket concentration will normally be viewed as favorably affectingcompetition.

Potential solution to different types of anti-competitiveconduct. These include:

Per se Prohibition Prohibition is the most direct form of anti-competitivemeasure that an authority can undertake. IT refers to those activities whichare ambiguously detrimental to regular competitive behavior in a market (e.g.,price fixing).

Rule of Reason (Competition Test)A wide variety of business practices thatwhile inhibiting competition, may not require total prohibition, The most


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widely used determinant in such a case is whether or not such activity reducescompetition in the market.

AuthorizationA mechanism through which the public benefit fromostensibly ant-competitive conduct can be assessed as a counterbalancing consideration. The process involved here is a directintervention or inquiry by a governing commission. Authorizationimplies that the commission can authorize certain conduct wherethere is a perceived net benefit to the community from anti-competitiveconduct.

Notification involves the approval of certain types of anti-competitive conduct upon the offender being granted immunity,conditional on the consent of the market regulator. These type ofarrangements rely on absolute openness and transparency.

Examples of Anti-competitive Conduct

o Price-fixing agreement competitors agree to fix prices at aparticular level, use of less obvious devices such asrecommended prices, in reality, fix prices by agreement.

o Market sharing agreements agreement among competitors toshare a market. Ex: a number of producers may choose torestrict their sales to certain geographic areas, thus developinglocal monopolies.

o Exclusionary provisions agreements between competitors tolimit dealings with a particular supplier or customer or aparticular class of customer. Ex: primary boycotts, secondary

boycotts. These actions are taken to prevent new firms fromentering the market, or to force existing firms out of the market.

Primary boycotts or exclusionary provisions occur when agroup of people or firms agree not to deal with a particularsupplier or customer. This is subject toper se prohibition.

Secondary boycottsoccur when a group of people who may nototherwise deal with the target organization persuade another uninvolved(supplier) not to deal with the target organization.

o Tie-in arrangements and third line forcing when the supply of

goods or services to a person is made provisional upon them alsopurchasing additional goods and services, either from the same supplier(tie in arrangement) or from another specified supplier (third line forcing)

o Retail price maintenance refers to action by suppliers,manufacturers or wholesalers specifying a minimum price below whichgoods or services may not be resold or advertised for resale.


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E. REGULATORY RESTRICTIONS ON COMPETITION

9. What are regulatory restrictions?

o Regulatory restrictions are governments own restrictions oncompetitive conduct, either through legislated regulation or directownership.

These restrictions can detract from overall competitiveness in theeconomy, in much the same way as market failure, in the sense thatthey detract from the regular workings of the market.

Regulatory restrictions may entrench a smaller number ofplayers in a less competitive environment. Consequences of these arehigher prices, poorer quality goods and a group of firms that have adiminished response to their market.

Regulatory Restrictions Existing in the Philippines

o Regulatory barriers to market entry, including licensing andfranchising agreements;

o Government monopolies, including monopolies on public utilitiessuch as electricity generation and supply, telephone services andthe shipping industry;

o Rural marketing, especially restrictive marketing boards; and

o Other restrictions on competitive conduct.

10. Forms of Regulations that Impact on Competition

There are two (2) forms of regulations that impact on competitiondirectly:

Barriers to entry are burdens or limitations forcing any firm notpresently operating in a market. They derive from;

o Economies of scale due to market share achieved by the

incumbents;

o Capital requirements (including investment in branddevelopment through advertising and the like);

o Cost savings accruing to existing firms from their experienceand familiarity with the particular industry


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o Monopoly access to key infrastructure;

o Monopoly of key industry knowledge.

Regulations that restrict competitive behavior:

o Price control; and

o Advertising restrictions

Impact of Regulation

o Higher prices;

o Lower quality goods; and

o Less consumer choice as a result of reduced competition

In the case of monopolies, they can prevent any competition inthe market

F. ESSENTIAL FACILITIES-

11. What is essential facility?

Within the framework of competition policy, an essential facility is a majorinfrastructure which exhibits two characteristics:

The facility is essential to the effective operation of an economic

organization; and

The facility exhibits natural monopoly characteristics. Ex:electricity grids, rail infrastructure, roads, port facilities, pipelines andtelecom network.

12. What is natural monopoly?

Distinguishing feature: one facility can supply the entire marketdemand more clearly than two or more smaller facilities.

Typically, natural monopolies have the following features:

Large development and start-up costs

Economies of scale: as the organization increases its output, theaverage cost per unit output declines


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Natural monopolies are an outcome of the size of the market and thetype of technology available to meet its demand. It is not a marketstructure, it is a cost minimizing method of production. There are twomajor implications:

An industry may consist of more than one firm even though the existingtechnology would suggest that monopoly is more economically efficient.

The existence of natural monopoly conditions in an industry may varyas demand varies and as the prevailing technology changes

G. MAIN AREAS OF CONCERN OF COMPETITION LAW/POLICY

What are the main areas/concerns which competition law/policyshould address?

Competition laws and policies are meant to address concerns that include:

a) preventing enterprises from entering into agreements which donot have any beneficial features and which will restrictcompetition, either amongst themselves or between them andthird parties;

b) controlling attempts by monopolists or dominant firms fromabusing their market position and preventing new firms fromentering the market;

c) ensuring that workable competition is maintained in

oligopolistic industries; and

d) monitoring mergers between independent enterprises, wherethe effect of the merger may result in market concentration andreduction in competition.

H. AGENCIES IMPLEMENTING COMPETITION POLICY

1. What are the agencies in the Philippines undertaking theimplementation and enforcement of competition laws?

Tariff Commission (TC) An attached agency of the National Economicand Development Authority (NEDA), it is mandated to assist the CabinetCommittee on Tariff and Related Matters (TRM) in the formulation of anational tariff policy and to monitor the implementation of the Tariff andCustoms Code (TCC).

Bureau of Import Services (BIS) A staff agency of the Department ofTrade and Industry (DTI), it is mandated to monitor import quantitiesand prices of selected sensitive items (particularly liberalized goods) to


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anticipate surges of imports and assist domestic industries againstunfair trade practices.

Bureau of Trade Regulation and Consumer Protection (BTRCP) - Also astaff agency of the DTI, it is mandated to formulate and monitor theregistration of business names and the licensing and accreditation of

establishments; it also evaluates consumer complaints and productutility failures.

Securities and Exchange Commission (SEC) An attached agency of theDepartment of Finance (DOF), it is mandated to administer corporategovernment laws such as the approval and registration of corporateconsolidations, mergers and combinations. It also implements theSecurities Act of 1982 which penalizes fraudulent acts in connectionwith the sale of securities (e.g. price manipulation, inside trading, shortselling, etc).

Other agencies likewise enforce laws on anti-competitive behavior such as:

DTI and attached agencies including the Bureau of Foods andDrugs, Intellectual Property Office, and the Bureau ofProduct Standards for consumer welfare and protection.

Philippine Economic Zone Authority for ecozone developersand ecozone-registered enterprises

Certain enforcement agencies are also industry-specific like:

Bangko Sentral ng Pilipinas - for banks and financial institutions

Insurance Commission - for insurance companies National Food Authority - for rice, corn, wheat and other

grains and food stuff Sugar Regulatory Administration - for the sugar industry Philippine Coconut Authority - for the coconut industry Garments and Textile Export Board - for garment

manufacturers and exporters Board of Investments - for pioneer/non-pioneer industries and

those listed in the Investments Priorities Plan, availing ofthe incentives under the Omnibus Investments Code

National Telecommunications Commission - fortelecommunications companies

Land Transportation Franchising and Regulatory Board - forcommon carriers for land

Civil Aeronautics Board - for companies engaged in aircommerce

Maritime Industry Authority - for the shipping industry Philippine Ports Authority - for port operators and arrastre

services


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The major reforms implemented include, among others:

1. substantial trade reforms which reduced the number of regulateditems to a minimum and brought down tariff rates

2. abolition of a number of regulatory bodies3. privatization

4. demonopolization of the telecommunications industry5. some deregulation in the shipping and airline industries6. oil deregulation7. easing of entry of foreign banks8. easing the foreign equity limits, and resorting to a much less

restrictive negative list of activities where foreign equity is limitedthe retail trade law.

I. BASIC PHILIPPINE LAWS DEALING WITH COMPETITION POLICY

1. What are some of the basic laws dealing with competition?

The Philippine Constitution provides that the state shall regulate orprohibit monopolies when the public interest so requires. No combinations inrestraint of trade or unfair competition shall be allowed.

The most basic law addressing anti-competitive behavior is penal orcriminal in nature. Article 186 of the Revised Penal Code defines andpenalizes monopolies and combinations in restraint of trade and providespenalties therefor.

The Civil Code of the Philippines (which came into effect in August 1950)and Republic Act No. 165 (otherwise known as the Act to Prohibit Monopolies

and Combinations in Restraint of Trade) allow for the collection of damagesarising from unfair competition.

While the cited statutes mention or refer to competition, none of themactually defines the term.

Special laws or statutes have also been enacted to specifically addresssome unfair trade practices. The Intellectual Property Code provides for theprotection of patents, trademarks and copyrights. The Corporation Code ofthe Philippines provides for the rules regarding mergers and consolidations,and the acquisition of all or substantially all the assets or shares of stock ofcorporations. The Revised Securities Act which complements the Corporation

Code proscribes the manipulation of security prices and insider trading.

Another piece of important legislation is the Price Act which defines andidentifies illegal acts of price manipulation such as hoarding, profiteering andcartels. Just as important is the Consumer Act of the Philippines which,among others, provides for consumer product quality and safety standards.


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2. What should the government do to strengthen the economyscompetition regime?

The government recognizes the need to enact a comprehensive competitionpolicy framework in order to address the inadequacies of past legislationsdealing with unfair trade measures. Identifying areas for change andimprovement is a fundamental step in developing an effective competitionregime. The following factors should be taken into consideration:

Markets in the formulation of competition policy, both the domesticand international markets should be taken intoconsideration. Competing in the international market is largelydependent on how open, strong and integrated the domestic market is.Unfair trade practices and anti-competitive behavior in the domesticmarket may very well undermine, even nullify, gains from marketopening initiatives.

MeasuresLaws bearing on competition are numerous and varied. However,there remains a need to enact an overall law on competition, particularly acomprehensive anti-trust legislation. There are several bills pending inCongress where some authors have suggested that competition law should:

(a) focus on the actual and or potential business conduct of firms in a givenmarket, and not on the absolute or relative size of firms. It should look at thebusiness conduct of firms and the business environment in which the firmsoperate.

(b) be effectively harmonized and linked with other governmentpolicies. Promoting competition in the business environment constrains anti-

competitive behavior by firms and also inculcates sound business practices andethics.

(c) be a law of general application, addressing all sectors of theeconomy. Exemptions from its application may be allowed if they will not limitcompetition, are based on sound economic principles and are aimed atfacilitating legitimate economic activity.

(d) contain provisions explicitly prohibiting business practices that are clearlyagainst economic efficiency and consumer welfare, such as price fixing, bidrigging, restriction of output and market shares, allocation of geographicmarkets and customers, which should be deemed illegalper seand subject tocriminal law and severe penalties.

(e) provide for a rule of reason approach with respect to horizontal andvertical mergers, specialization agreements, joint ventures, verticalmanufacturing, wholesale and retail distribution arrangements. Priornotification to and approval by the concerned agency of such businessarrangements are recommended but only with respect to the largest


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transactions, taking into consideration size thresholds in terms of market share,assets, sales and/or employment of parties involved.

Maintenance - The effective implementation and enforcement of anti-competition lawsshould be vested in a centralized agency with sufficient powers to oversee and monitorthe competitive climate in the different sectors of the economy, to formulate andrecommend such measures as would ensure the maintenance of competition in thePhilippine domestic market and as would anticipate developments in the internationalmarket.

Message - Finally, a competition policy can only be effective if the peoplebelieve in it. This is best ensured by allowing the people to participate inmaking the decision. Consultations and consensus building, therefore,are prerequisites to the adoption of such policy. It is also important toconsult the public because much of the anti-competitive behavior in themarket may be attributed to them.

To ensure appropriateness and acceptability of proposed measures as well aseasier implementation and observance by the public, dissemination, awareness,education and information campaigns should be undertaken through mass media.

3. What are the difficulties encountered in enacting a National CompetitionLaw and creating Central Competition Authority?

A number of underlying issues exist which hinder the development of aworkable competition policy. These issues include:

Lack of Understanding and Education on the Rationale and PositiveImplications of a Competition Policy

Despite the introduction of pro-competitive reforms in the economy, competitionculture has yet to be ingrained in the psyche of the Filipino people (businesscommunity, consumers, government officials, legislature) especially in these times ofglobal economic slow down.

Lack of Political WillCertain influential members of Congress are themselvescorporate owners/majority stockholders of dominant firms who are threatened by theenactment of a comprehensive competition policy/law. They would resist the passageof a competition bill.

Lack of Technical Expertise and Experience The competition authority shouldhave very competent and knowledgeable manpower to define markets, identify anti-competitive actions, and judiciously construct and administer competition tests onissues of concentration, agreements, mergers and acquisitions. The question is,what would be the best way of developing such expertise and institutions?

Lack of Agreement on How to Establish a Single Central CompetitionAuthority


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One approach is to do this gradually, possibly on a piecemeal basis. The creation of acoordinating body to administer an austere law would be a good start.

Another approach is to transform an existing body which is performing some of thefunctions of competition policy.

A third approach would be to create a new central body which could be designed todevelop and evolve into what it should ideally become.

Current Lack of Experience and Knowledge in Competition Policy Mattersin the Judiciary If this is not addressed, then the new law will remain un-enforced (as existing legislation is) or worse, enforcement will be inappropriate,creating potential economic inefficiencies. The issue in respect to insufficientknowledge and experience is clear: It is one thing to know that a firm in a positionto control the relevant market for a particular good or service is not permitted tolimit production for the purpose of raising prices, and another to prove that thefirm in question has control of a market and that it is reducing production to raise

prices. Still another thing is adjudicating a case where such accusations are made.

Continuing Resistance to Globalization by Certain Sectors Who FeelThreatened by Liberalization and International Trade Commitments

Domestic industries allege that they are suffering injury or the threat thereofbecause of import surge resulting from the governments unilateral tariffreduction program and/or tariff commitments in ASEAN and WTO.

J. THE WAY FORWARD

Sustained advocacy and public information campaign on the culture of faircompetition

Drafting of a competition policy bill incorporating international bestpractices including competitive neutrality, legislative review and accessregimes

Act of Congress

Competition authority as a constitutional body

Multilateral/Regional/Bilateral Agreement on Competition Policy

COMPETITION POLICY

Republic of the Philippines

EXISTING COMPETITION LAWS


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Philippine Constitution (1987)- The Philippine Constitution of 1987 prohibits anti-

competitive

practices. Monopolies are not prohibited "per se", but only when public interest so

requires. It

also prohibits combinations in restraint of trade or unfair competition. However, the1987

Constitution provides no imposable sanctions for violations of these provisions. Article

186 of

the Revised Penal Code R.A. 3815 (1930)- Similar to Section 2 of the Sherman Act

(1890)

which was the major legislation that ushered competition law into the limelight in the

U.S. It

describes the acts punishable, such as monopolies and combinations in restraints of

trade, and

the penalties imposable on such. Republic Act 3247 (An Act to Prohibit Monopolies

and

Combinations in Restraint of Trade) (1961) provides for recovery of treble damages for

civil

liability arising from anti-competitive behavior. Republic Act 165 (1947) (Patent Law)

and

Republic Act 166 (1971) (Trademark Law) describes the appropriate civil action which

can be

resorted to, and the penalties imposable. Presidential Decree 49 (1972) (Copyright Law)

penalizes copyright infringement. Republic Act 8293 (1997) An Act prescribing the

Intellectual

Property Code and establishing the Intellectual Property Office Republic Act 386 (1949)

(Civil

Code of the Philippines) stipulates the collection of damages arising from unfair

competition.

Republic Act 7581 (1991) (The Price Act) protects the consumers by stipulating price

manipulation (hoarding, profiteering and cartels) as illegal acts. Republic Act 7394

(1932) (The


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Consumer Act of the Philippines) imposes penalties for such behavior as deceptive,

unfair and

unconscionable sales practices in both goods and credit transactions. The Philippine

Corporation Code Batas Pambansa Blg. 68 (1980) provides for rules and procedures to

approve all combinations, mergers and consolidations. Revised Securities Act, Batas

Pambansa Blg. 178 (1982) Republic Act No. 337 regulates Banks and Banking

Institutions and

for other purposes (General Banking Act) (1948)

In recent years, there were already a number of laws passed by Congress and various

Executive Orders signed by the President to strengthen the Competition policy

framework. 1.

Trade and Investment Liberalization To liberalize trade and in compliance with

international

commitments, tariffs on numerous industrial and agricultural products have been

reduced

and/or modified through various executive orders. These are the following: Republic

Act No.

8178 (1996) - An Act Replacing Quantitative Import Restrictions on Agricultural

Products,

Except Rice, with Tariffs, Creating the Agricultural Competitiveness Enhancement

Fund, and

for other Purpose. Republic Act 7650 (1993) - An Act Repealing Section 1404 and

amending

Sections 1401 and 1403 of the Tariff and Customs Code of the Philippines, as

amended,

relative to the Physical Examination of Imported Articles. Republic Act 8181 (1996) to

shift the

basis for the computation of duties from home consumption value to transaction value

to

address some of the leakages in collections. Republic Act 7843 (1994) also known as

the AntiDumping Act of 1994, was enacted to rationalize and strengthen the


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provisions on antidumping in the Tariff and Customs Code. Executive Order No. 264:

(1995) Modifying the

Nomenclature and the Rates of Import Duty on Certain Imported Articles under

Section 104 of

the Tariff and Customs Code of 1978 (Presidential Decree No. 1464) as amended.Executive

Order No. 287: (1995) Modifying the Rates of Duty on Certain Imported Articles as

Provided for

under the Tariff and Customs Code of 1978, as amended, in Order to Implement the

1996

Philippine Schedule of Tariff Reduction under the New Time Frame of the Accelerated

Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade Area(AFTA).

Executive Order No. 288: (1995) Modifying the Nomenclature and the Rates of Import

Duty on

Certain Imported Articles under Section 104 of the Tariff and Customs Code of 1978

(Presidential Decree No. 1464), as amended. Executive Order No. 313: (1996)

Modifying the

Nomenclature and the Rates of Import Duty on Certain Imported Articles under

Section 104 of

the Tariff and Customs Code of 1978 (Presidential Decree No. 1464), as amended

Executive

Order No. 328: (1996) Modifying the Nomenclature and the Rates of Import Duty on

Certain

Imported Articles under Section 104 of the Tariff and Customs Code of 1978

(Presidential

Decree No. 1464), as amended. Executive Order No. 365: (1996) Modifying the

Nomenclature

and the Rates of Import Duties on Certain Imported Articles under Republic Act Nos.

8180 and

8184. Executive Order No. 388: (1996) Modifying the Nomenclature and the Rates of

Import


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Duties on Certain Imported Articles under Section 104 of the Tariff and Customs Code,

as

amended. Executive Order No. 390: Modifying the Nomenclature and the Rates of

Import

Duties on Certain Imported Articles under Section 104 of the TCC of 1978 (P.D. No.1464) as

amended. Public Utilities

a. Maritime Industry Executive Order No. 185 (1994) was adopted to foster

competition

through more liberalized rules on the entry of new operators for existing routes, the

deregulation of the entry of newly-acquired vessels into routes already served by

franchised operators, and vessel rerouting or amendment of authorized route and

change in sailing schedules and frequency. Executive Order No. 213 (1994) provides

for the deregulation of domestic shipping rates in the following areas: a) first and

second class passage rate for passenger-carrying domestic vessels, b) passage rates

for vessels catering to tourism as certified by the Department of Tourism or those

serving DOT-certified tourist priority links/areas, c) freight rates for all commodities

classified as Class "A" and "B" and "C", except for non-containerized basic

commodities, and where the route/link is still being serviced by only one operator.

b. Civil Aviation Executive Order No. 219 (1995), international civil aviation was

sought

to be liberalized through the designation of at least two official carriers for the

Philippines, and the possibility of designating other carriers as official carriers when

the

total frequency requirements of the Philippines under its various Air Services

Agreement cannot be fully serviced by the first two designated official carriers.

c. Port Services Executive Order No. 212 (1994) - In order to accelerate the

demonopolization and privatization program for government ports. Competition is


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encouraged in the provision of cargo handling and other port services. Under the

government's demonopolization program, ship owners, operators, charterers or other

users have the option to contract or engage the services of the Philippine Port

Authority (PPA) authorized handler or port service contractor of their choice.

d. Telecommunications The most successful efforts expended in breaking up

monopolies and cartels were undertaken in the telecommunications industry.

Executive Order No. 59 (1993) required mandatory interconnection for other

telecommunications firms with the Philippine Long Distance Telephone Company

(PLDT) backbone. Executive Order No. 109 (1993) laid down the government's policy

to improve the Local Exchange Carrier Service. Authorized international gateway

operators were required to provide local exchange service in served and unserved

areas, including Metro Manila, within three years from the grant of authority from the

National Telecommunication Commission. Republic Act NO. 7925 (1995), entitled "An

Act to Promote and Govern the Development of Philippine Telecommunications and

the Delivery of Public Telecommunications Services" was enacted to provide a

comprehensive guideline regulating the public telecommunications industry in the

Philippines.

e. Energy Executive Order No. 215 (1987) was issued to promote private sector

participation in the business of generating electricity. Republic Act No. 8180 (1996),

which provides for the deregulation of the oil industry, was also recently enacted.

Executive Order No. 377, Providing the Institutional Framework for the Administration

of the Deregulated Local Downstream Oil Industry, Series of 1996

f. Water Executive Order No. 311 (1996) was issued to encourage private sector

participation in the operation and facilities of the MWSS.

g. Privatization of State Enterprises Executive Order No. 298 (1996) - issued by the

President to provide for alternative and/or intermediate modes of privatization through


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joint ventures, B-O-T schemes, management contracts, lease purchase arrangements

and securitization.

h. Taxation, Monetary and Fiscal Reforms Republic Act No. 7660 - rationalization of

the documentary tax system. Republic Act No. 7717 - the imposition of taxes for sale

of shares of stock through the stock exchange or through initial public offerings.

Republic Act No. 7716 - Expanded Value-Added Tax. Republic Act No. 7642 was also

enacted to increase the penalties for tax evasion and violation of the provisions of the

National Internal Revenue Code. Still pending deliberations in Congress is the

Comprehensive Tax Reform Package endorsed by the Ramos Administration. Under

Central Bank Circular No. 1389 (Consolidated Foreign Exchange Rules and

Regulations), as amended, foreign exchange restrictions were lifted thereby allowing

the market to freely trade in foreign currencies. Republic Act No. 8183 was passed

expressly repealing the Uniform Currency Law (Republic Act No. 529) which restricted

parties to a contract to deal only in Philippine Peso in order to settle monetary

obligations.

MEMORANDUM

COMPETITION LAW IN THE PHILIPPINES

________________________________________________________________________

To date, the Philippines do not have a comprehensive and developed legislation

relating

to anti-trust and monopoly activities. However, there are several anti-trust bills

pending

before the Twelfth Philippine Congress. They are as follows:1. Senate Bill (S.B.) No. 175 - An Act creating the Fair Trade Commission,

prescribing its powers and functions in regulating trade competition, and

monopolies and for other purposes;

2. S.B. No. 1361 - An Act providing for more effective implementation of the


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Constitutional mandate against monopolies, combination and restraint of trade

and unfair competition by redefining and strengthening existing laws, processes

and structure regulating the same, and for other purposes;

3. S.B. No. 1600 - An Act prohibiting monopolies, attempt to monopolize industry

or line of commerce, manipulation of prices of commodities, asset acquisition and

interlocking membership in the board of directors of competing corporate bodies

and price discrimination among customers, providing penalties therefore, and for

other purposes;

4. House Bill (H.B.) 1906 - An Act declaring unfair trade practices as acts of

economic sabotage. HB 1906 declares the following acts as economic sabotage

and provides criminal sanctions for the same: (i) smuggling; (ii) technical

smuggling; (iii) misclassification of importation; (iv) dumping, and (v) other

forms of unfair trade practices.

5. H.B. No. 198 - An Act creating a special body that shall regulate and exercise

authority over monopolistic practices, combination in restraint of trade and unfair

competition and appropriating funds therefore; and

6. H.B. No. 2439 - An Act penalizing unfair trade practices and combinations in

restraint of trade, creating the Fair Trade Commission, appropriating funds

therefore, and for other purposes.

The most significant of these bills is S.B. No. 175, proposing the passage of the Fair

Trade Act or an Act Creating the Fair Trade Commission, Prescribing Its Powers and

Functions in Regulating Trade Competition and Monopolies and For Other Purposes.

This bill consolidates all anti-trust laws into one law and establishes a Fair Trade

Commission (Commission), an executive body that will enforce the FairTrade Act.

Generally, the bill seeks to prohibit monopolies and cartels and other practices which

diminish, impair or prevent competition and free trade. It defines absolute monopolies,


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relative monopolies and trusts which may constitute prima facie violations of the law.

A trust is defined as a merger, acquisition of control or any act whereby companies,

partnerships, shares, equity, trusts or assets are concentrated among competitors,

suppliers, customers or any other business entity. Under enumerated circumstances,

the

bill, if passed into law would require prior notification to the Commission before trusts

are formed.

There are also laws of general application that are relevant to the regulation of anti-

trust

and monopoly activities.

The Philippine Constitution outlines the state policy of regulating or prohibiting

monopolies when the public interest so requires. No combinations in restraint of trade

or

unfair competition are to be allowed.

In relation to this policy, the Revised Penal Code of the Philippines penalizes parties

entering into any contract or agreement or taking part in any conspiracy or

combination

in the form of a trust or otherwise, in restraint of trade or commerce, as well as

penalizes

those who prevent, by artificial means, free competition in the market. It also imposes

penalties on parties who monopolize any merchandise or object of trade or commerce,

or

who combine with any other persons to monopolize said merchandise or object in

order

to alter the prices thereof or who spread false rumors or make use of any other artifice

to

restrain free competition in the market.

The Civil Code allows the recovery of damages in cases of unfair competition in

agricultural, commercial or industrial enterprises. There are also other laws on unfair

competition pertaining to the protection of intellectual property rights.


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President Aquinos Most Evil Proposal: Antitrust Law

AUGUST 7, 2010

tags: anti-competition laws, antitrust law, Capitalism,COMPETITION, FREE-

MARKET,JUAN PONCE ENRILE, NOYNOY Aquino, philippine economy, Senate bill123

Theres a legislative proposal that will make successful businessmen in this country

criminals: Antitrust Law! Say no to this non-objective law!

The Aquino administration is now preparing for the implementation of an antitrust

law in the Philippines in order to legislate private corporations and companies

monopolistic tendencies. The President said in his first State of the Nation Address

(SONA) that it is the governments duty to ensure that the market is fair for all- and, to

fulfill his statist duty as the highest elected official of the land, he believes that he has

to put an end to monopolies or cartels in the country. Thus, he said that the country

needs an antitrust law that will give life to these principles, to afford Small - and

Medium-Scale Enterprises the opportunity to participate in the growth of our

economy.

Does the economist President know what hes talking about?
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The Philippine Senate already has its proposed Antitrust Act (Senate Bill 123)

entitled,An Act Prohibiting Monopolies, Attempt to Monopolize an Industry or

Line of Commerce, Manipulation of Prices of Commodities, Asset Acquisition and

Interlocking Memberships in the Board of Directors of Competing Corporate

Bodies and Price Discrimination Among Customers, Providing Penalties Therefor,and for other Purposes.

However, what is clear is that the Senate proposal authored by Senator Juan Ponce

Enrile is simply a rip-off- or a plagiarized copy- of three United States laws, which are

the basis of the proposed anti-trust and unfair competition laws: theSherman Act(15

USC 1-7), theClayton Actof 1914, and theRobinson-Patman Actof 1936 (15 USC

13).

Sen. Enrile wrote the following in the billsExplanatory Note:

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

In a volatile economic situation such as that which we are experiencing now, it is not

very difficult to imagine how artificial prices in oae or two commodities is able to directly

or indirectly raise the prices of related goods and services.

In Article XII, Sectioii 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 perpetuatingmonopolies in the free market landscape necessitates an equally sophisticated

legislation

Documents

Prelims Argu