Promoting a Tussle: Philippine Competition Act Made Simple

Christian Andrew Labitoria Gallardo[1]

It was a typical summer afternoon during the late 2000s. A bit lazy, yes, but in this humid and hot Sunday afternoon of May, there was no time for siesta. The roads were clear, and everyone was stuck inside their homes watching a potential fight of the century. And nope, this was more than a decade before the pandemic era. I was talking about the time when "The Battle of East and West", or the Manny Pacquiao v Ricky Hatton fight, was aired on TV on the 2nd of May 2009.

Basing on how that match literally stopped almost everyone from pursuing their routine, it is safe to conclude the Filipinos love a good fight. From basketball games to love triangles and mistress-versus-wife slap scenes in telenovelas, a fair competition induces the interest of the many. Similarly, in the economy, a fair competition between competitors is encouraged to prevent monopoly of trade.

Philippine Competition Act

To ensure a healthy competition which would ultimately benefit the consumers and the general public, the Congress enacted the Philippine Competition Act (RA 106667) on 2015. Curiously however, the term “competition” was not formally defined under the law or its implementing rules and regulations. The law however prescribes guidelines and limitations on acts and conducts of entities which are anti-competitive in nature, and are therefore penalized under the law.

Who are covered?

The law covers all entities and persons, whether natural or juridical, registered or not, engaged in an economic activity in the Philippines. Thus, it covers not only corporations and partnerships but also sole proprietorships doing business in the Philippines. Moreover, it covers as well international transactions which have a foreseeable effect on Philippine commerce, even if they are conducted outside the Philippines.[2]

It must be noted however that Philippine Courts have no jurisdiction over foreign corporations not registered and not doing business in the Philippines. Hence, while the Philippine Competition Act provides that it covers international entities which affects the Philippine commerce, these entities however must be doing business in the Philippines, that is, it must make continuous commercial transactions in our territory.[3] Otherwise, the penal provisions of the Philippine Competition Act cannot be enforced against them.

Say, for example, A owns the largest oil mining company in Saudi Arabia. A agreed with B, the owner of the only other mining company in Saudi, to have the prices of gas be sold to independent distributors at a fixed amount. Due to this agreement, the suppliers of gas worldwide, including that of the Philippines, increased their prices. While indeed the agreement of A and B affected the Philippine commerce, no court in the Philippines has the jurisdiction to require them to appear before it and submit to its judgment. This is so because their economic activities are limited to their home country, even if the products they produce ultimately reach Philippines through independent entities.

Going now to the main subject of the law, what are acts anticompetitive in nature?

What exactly is an Anticompetitive Agreement?

Suppose the superheavy element 115, informally called ununpentium, necessary to make objects float in contravention of the laws of gravity similar to UFOs, was discovered to come from meteors that fell from Calivo, in the Island of Panay. Now, only I possess the necessary technology and scientific knowledge to mine element 115 from these meteors. Suppose now that I supply these elements to UFO manufacturers in the Metro, under terms mutually accepted by the parties. Would there be a violation of the Anti Competition Act given that I do not have any competition to begin with? The plain answer to that would be in the negative as the mere absence of competition does not amount to a violation of the Philippine Competition Act.

Anticompetitive Agreements are those contracts or arrangements that entirely substantially prevents, restricts or lessens competition as to price or other terms of trade through direct or indirect means.[4] There are three forms of anticompetitive agreements, namely:

(I) Agreements between competitors to restrict competition as to price or other tems of trade, or to manipulate a bidding or auction[5];

(II)Agreement between competitors to control the production, market, technical development or investment, such as dividing or sharing a market by territory or type of goods or service to be offered, provided that such agreement substantially prevents or restricts competition; and[6]

(III) Agreements other than those stated above which have the effect of substantially restricting or lessing competition unless such agreement contributes to the improvement of the production or distribution of goods and services or to the economic progress in general.[7]

Note that the first form, or the fixing of prices, is prohibited per se, while the second form or the agreement to control the production, market, technological development or investment is prohibited only when such substantially prevents or restricts competition. The third form, or the “catch-all” provision, covers all forms of agreements that substantially prevents competition only when it does not serve the public in general.

Now this rather technical, but hopefully not boring, discussion may need some concrete examples for easier understanding. Join me next week for some examples of these anticompetitive agreements. Meanwhile, please do join our free facebook group for legal advice and announcements.

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[1]Christian Andrew Labitoria Gallardo is a recent graduate of the Ateneo School of Law with a Juris Doctor degree, and is currently an associate of the Sangalang and Gaerlan, Business Lawyers, a law firm specializing in labor, corporate and business law. You may reach him through a phone call or message (09157042132) or via email (andrew.gallardo@paladinslaw.org). [2] Section 3, RA 10667, Philippine Competition Act. [3] § 3(d), RA 7042. [4] § 14, RA 7042. [5] § 14 (a), RA 7042. [6] § 14 (b), RA 7042. [7][7] § 14 (c), RA 7042.