Garcia vs.

Executive Secretary THE FACTS After years of imposing significant controls over the downstream oil industry in the Philippines, the government decided in March 1996 to pursue a policy of deregulation by enacting Republic Act No !1!" #R A No !1!"$ or the %&ownstream 'il (ndustry &eregulation Act of 1996 ) R A No !1!", however, met strong opposition, and rightly so, as this *ourt concluded in its November +, 199, decision in Tatad vs. Secretary of Department of Energy -./-./ 0e struc1 down the law as invalid because the three 1ey provisions intended to promote free competition were shown to achieve the opposite result2 contrary to its intent, R A No !1!"3s provisions on tariff differential, inventory re4uirements, and predatory pricing inhibited fair competition, encouraged monopolistic power, and interfered with the free interaction of mar1et forces 0e declared5 R A No !1!" needs provisions to vouchsafe free and fair competition 6he need for these vouchsafing provisions cannot be overstated Before deregulation, P76R'N, 897:: and *A:67; had no real competitors but did not have a free run of the mar1et because government controls both the pricing and non<pricing aspects of the oil industry After deregulation, P76R'N, 897:: and *A:67; remain unthreatened by real competition yet are no longer sub=ect to control by government with respect to their pricing and non<pricing decisions 6he aftermath of R A No !1!" is a deregulated mar1et where competition can be corrupted and where mar1et forces can be manipulated by oligopolies ->/->/ Notwithstanding the e?istence of a separability clause among its provisions, we struc1 down R A No !1!" in its entirety because its offensive provisions permeated the whole law and were the principal tools to carry deregulation into effect *ongress responded to our &ecision in Tatad by enacting on @ebruary 1", 199! a new oil deregulation law, R A No !A,9 6his time, *ongress e?cluded the offensive provisions found in the invalidated law Nonetheless, petitioner Barcia again sought to declare the new oil deregulation law unconstitutional on the ground that it violated Article ;((, 8ection 19 of the *onstitution -A/-A/ 9e specifically ob=ected to 8ection 19 of R A No !A,9 which, in essence, prescribed the period for removal of price control on gasoline and other finished petroleum products and set the time for the full deregulation of the local downstream oil industry 6he assailed provision reads5 87* 19 Start of Full Deregulation. C @ull deregulation of the (ndustry shall start five #+$ months following the effectivity of this Act5 Provided, however, 6hat when the public interest so re4uires, the President may accelerate the start of full deregulation upon the recommendation of the &'7 and the &epartment of @inance #&'@$ when the prices of crude oil and petroleum

products in the world mar1et are declining and the value of the peso in relation to the D8 dollar is stable, ta1ing into account relevant trends and prospects5 Provided, further, 6hat the foregoing provision notwithstanding, the five #+$< month 6ransition Phase shall continue to apply to :PB, regular gasoline and 1erosene as socially<sensitive petroleum products and said petroleum products shall be covered by the automatic pricing mechanism during the said period Dpon the implementation of full deregulation as provided herein, the 6ransition Phase is deemed terminated and the following laws are repealed5 #a$ #b$ #c$ Republic Act No 61,>, as amended2 8ection + of 7?ecutive 'rder No 1,., as amended2 :etter of (nstruction No 1A>1, dated 'ctober 1+, 19!A2

#d$ :etter of (nstruction No 1AA1, dated November .", 19!A, as amended2 #e$ #f$ #g$ :etter of (nstruction No 1A6", dated May 9, 19!+2 Presidential &ecree No 1!!92 and Presidential &ecree No 19+6, as amended by 7?ecutive 'rder No 1>,5

Provided, however, 6hat in case full deregulation is started by the President in the e?ercise of the authority provided in this 8ection, the foregoing laws shall continue to be in force and effect with respect to :PB, regular gasoline and 1erosene for the rest of the five #+$<month period Petitioner Barcia contended that implementing full deregulation and removing price control at a time when the mar1et is still dominated and controlled by an oligopoly -+/-+/ would be contrary to public interest, as it would only provide an opportunity for the Eig > to engage in price<fi?ing and overpricing 9e averred that 8ection 19 of R A No !A,9 is %glaringly pro<oligopoly, anti<competition, and anti<people,) and thus as1ed the *ourt to declare the provision unconstitutional 'n &ecember 1,, 1999, in Garcia vs. Corona !""" Garcia case#,-6/-6/ we denied petitioner Barcia3s plea for nullity 0e declined to rule on the constitutionality of 8ection 19 of R A No !A,9 as we found the 4uestion replete with policy considerations2 in the words of Fustice Gnares<8antiago, the ponente of the !""" Garcia case5 (t bears reiterating at the outset that the deregulation of the oil industry is a policy determination of the highest order (t is un4uestionably a priority program of Bovernment 6he Department

of Energy $ct of !""% e?pressly mandates that the development and updating of the e?isting Philippine energy program %shall include a policy direction towards deregulation of the power and energy industry ) Be that as it may, e are not concerned ith hether or not there should !e deregulation. This is outside our "urisdiction. The "udgment on the issue is a settled matter and only Congress can reverse it. ??? ??? ???

Reduced to its basic arguments, it can be seen that the challenge in this petition is not against the legality of deregulation Petitioner does not e?pressly challenge deregulation The issue, #uite sim$ly, is the timeliness or the isdom of the date hen full deregulation should !e effective. %n this regard, hat constitutes reasona!le time is not for "udicial determination. Reasonable time involves the appraisal of a great variety of relevant conditions, political, social and economic 6hey are not within the appropriate range of evidence in a court of =ustice (t would be an e?travagant e?tension of =udicial authority to assert =udicial notice as the basis for the determination -7mphasis supplied / Dndaunted, petitioner Barcia is again before us in the present petition for certiorari see1ing a categorical declaration from this *ourt of the unconstitutionality of 8ection 19 of R A No !A,9 THE &ET%T%'( Petitioner Barcia does not deny that the present petition for certiorari raises the same issue of the constitutionality of 8ection 19 of R A No !A,9, which was already the sub=ect of the !""" Garcia case 9e disagrees, however, with the allegation that the prior rulings of the *ourt in the two oil deregulation cases-,/-,/ amount to res &udicata that would effectively bar the resolution of the present petition 9e reasons that res &udicata will not apply, as the earlier cases did not completely resolve the controversy and were not decided on the merits Moreover, he maintains that the present case involves a matter of overarching and overriding importance to the national economy and to the public and cannot be sacrificed for technicalities li1e res &udicata.-!/-!/ 6o further support the present petition, petitioner Barcia invo1es the following additional grounds to nullify 8ection 19 of R A No !A,95 1 8ubse4uent events after the lifting of price control in 199, have confirmed the continued e?istence of the Eig > oligopoly and its overpricing of finished petroleum products2

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6he unabated overpricing of finished petroleum products by the Eig > oligopoly is gravely and undeniably detrimental to the public interest2 No longer may the bare and blatant constitutionality of the lifting of price control be glossed over through the e?pediency of legislative wisdom or =udgment call in the face of the Eig > oligopoly3s characteristic, definitive, and continued overpricing2 6o avoid declaring the lifting of price control on finished petroleum products as unconstitutional is to consign to the dead letter dustbin the solemn and e?plicit constitutional command for the regulation of monopoliesHoligopolies -9/-9/

THE C')*T+S *),%(G -e resolve to dismiss the $etition. (n as1ing the *ourt to declare 8ection 19 of R A No !A,9 as unconstitutional for contravening 8ection 19, Article ;(( of the *onstitution, petitioner Barcia invo1es the e?ercise by this *ourt of its power of =udicial review, which power is e?pressly recogniIed under 8ection A#.$, Article J((( of the *onstitution -1"/-1"/ 6he power of =udicial review is the power of the courts to test the validity of e?ecutive and legislative acts for their conformity with the *onstitution -11/-11/ 6hrough such power, the =udiciary enforces and upholds the supremacy of the *onstitution -1./-1./ @or a court to e?ercise this power, certain re4uirements must first be met, namely5 #1$ #.$ an actual case or controversy calling for the e?ercise of =udicial power2 the person challenging the act must have %standing) to challenge2 he must have a personal and substantial interest in the case such that he has sustained, or will sustain, direct in=ury as a result of its enforcement2 the 4uestion of constitutionality must be raised at the earliest possible opportunity2 and the issue of constitutionality must be the very lis mota of the case -1>/-1>/

#>$ #A$

Actual Case Controversy Susceptible of Judicial Determination 6he petition fails to satisfy the very first of these re4uirements C the e?istence of an actual case or controversy calling for the e?ercise of =udicial power An actual case or controversy is one that involves a conflict of legal rights, an assertion of opposite legal claims suscepti'le of &udicial resolution2 the case must not be moot or academic or based on extra-legal or other similar considerations not cognizable by a court of

justice. 8tated otherwise, it is not the mere e?istence of a conflict or controversy that will authoriIe the e?ercise by the courts of its power of review2 more importantly, the issue involved must be susceptible of =udicial determination 7?cluded from these are 4uestions of policy or wisdom, otherwise referred to as political 4uestions5 As Ta(ada vs. Cuenco puts it, political 4uestions refer %to those 4uestions which, under the *onstitution, are to be decided by the people in their sovereign capacity, or in regard to which full discretionary authority has 'een delegated to the legislative or e)ecutive 'ranch of government ) 6hus, if an issue is clearly identified by the text of the Constitution as matters for discretionary action by a particular branch of government or to the people themselves then it is held to be a political uestion (n the classic formulation of Fustice Erennan in *a+er vs. Carr, %-p/rominent on the surface of any case held to involve a political 4uestion is found a te?tually demonstrable constitutional commitment of the issue to a coordinate political department2 or a lac! of judicially discoverable and manageable standards for resolving it" or the impossibility of deciding #ithout an initial policy determination of a !ind clearly for non-judicial discretion" or the impossibility of a court3s underta1ing independent resolution without e?pressing lac1 of the respect due coordinate branches of government2 or an unusual need for un4uestioning adherence to a political decision already made2 or the potentiality of embarrassment from multifarious pronouncements by various departments on the one 4uestion )-1A/-1A/ -7mphasis supplied / Petitioner Barcia3s issues fit snugly into the political 4uestion mold, as he insists that by adopting a policy of full deregulation through the removal of price controls at a time when an oligopoly still e?ists, 8ection 19 of R A No !A,9 contravenes the *onstitutional directive to regulate or prohibit monopolies-1+/-1+/ under Article ;((, 8ection 19 of the *onstitution 6his 8ection states5 6he 8tate shall regulate or prohibit monopolies when the public interest so re4uires No combinations in restraint of trade or unfair competition shall be allowed Read correctly, this constitutional provision does not declare an outright prohibition of monopolies (t simply allows the 8tate to act % when pu'lic interest so re,uires )2 even then, no outright prohibition is mandated, as the 8tate may choose to regulate rather than to prohibit 6wo elements must concur before a monopoly may be regulated or prohibited5 1 . 6here in fact e?ists a monopoly or an oligopoly, and Public interest re4uires its regulation or prohibition

0hether a monopoly e?ists is a 4uestion of fact 'n the other hand, the 4uestions of #1$ what public interest re4uires and #.$ what the 8tate reaction shall be essentially re4uire the e?ercise of discretion on the part of the 8tate 8tripped to its core, what petitioner Barcia raises as an issue is the propriety of immediately and fully deregulating the oil industry 8uch determination essentially dwells on the soundness or wisdom of the timing and manner of the deregulation *ongress wants to implement through R A No !A9, Kuite clearly, the issue is not for us to resolve2 we cannot rule on when and to what e?tent deregulation should ta1e place without passing upon the wisdom of the policy of deregulation that *ongress has decided upon 6o use the words of *a+er vs. Carr,-16/-16/ the ruling that petitioner Barcia as1s re4uires -an initial policy determination of a +ind clearly for non.&udicial discretion/2 the branch of government that was given by the people the full discretionary authority to formulate the policy is the legislative department &irectly supporting our conclusion that Barcia raises a political 4uestion is his proposal to adopt instead a system of partial deregulation C a system he presents as more consistent with the *onstitutional %dictate ) 9e avers that free mar1et forces #in a fully deregulated environment$ cannot prevail for as long as the mar1et itself is dominated by an entrenched oligopoly (n such a situation, he claims that prices are not determined by the free play of supply and demand, but instead by the entrenched and dominant oligopoly where overpricing and price<fi?ing are possible -1,/-1,/ 6hus, before full deregulation can be implemented, he calls for an indefinite period of partial deregulation through imposition of price controls -1!/-1!/ Petitioner Barcia3s thesis readily reveals the political,-19/-19/ hence, non<=usticiable, nature of his petition2 the choice of underta1ing full or partial deregulation is not for this *ourt to ma1e Ey enacting the assailed provision C 8ection 19 C of R A No !A,9, *ongress already determined that the problems confronting the local downstream oil industry are better addressed by removing all forms of prior controls and adopting a deregulated system 6his intent is e?pressed in 8ection . of the law5 87* . Declaration of Policy C (t shall be the policy of the 8tate to liberaliIe and deregulate the downstream oil industry in order to ensure a truly competitive mar1et under a regime of fair prices, ade4uate and continuous supply of environmentally<clean and high< 4uality petroleum products 6o this end, the 8tate shall promote and encourage the entry of new participants in the downstream oil industry, and introduce ade4uate measures to ensure the attainment of these goals (n Tatad, we declared that the fundamental principle espoused by 8ection 19, Article ;(( of the *onstitution is competition -."/-."/ *ongress, by enacting R A No !A,9, determined that this ob=ective is better realiIed by liberaliIing the oil mar1et, instead of continuing with a highly regulated system enforced by means of restrictive prior

controls 6his legislative determination was a lawful e?ercise of *ongress3 prerogative and one that this *ourt must respect and uphold Regardless of the individual opinions of the Members of this *ourt, we cannot, acting as a body, 4uestion the wisdom of a co< e4ual department3s acts 6he courts do not involve themselves with or delve into the policy or wisdom of a statute2-.1/-.1/ it sits, not to review or revise legislative action, but to enforce the legislative will -../-../ @or the *ourt to resolve a clearly non<=usticiable matter would be to debase the principle of separation of powers that has been tightly woven by the *onstitution into our republican system of government 6his same line of reasoning was what we used when we dismissed the first Barcia case 6he petitioner correctly noted that this is not a matter of res &udicata #as the respondents invo1ed$, as the application of the principle of res &udicata presupposes that there is a final =udgment or decree on the merits rendered by a court of competent &urisdiction 6o be e?act, we are simply declaring that then, as now, and for the same reasons, we find that there is no =usticiable controversy that would =ustify the grant of the petition C'(C,)S%'( 6o summariIe, we declare that the issues petitioner Barcia presented to this *ourt are non<=usticiable matters that preclude the *ourt from e?ercising its power of =udicial review 6he immediate implementation of full deregulation of the local downstream oil industry is a policy determination by *ongress which this *ourt cannot overturn without offending the *onstitution and the principle of separation of powers 6hat the law failed in its ob=ectives because its adoption spawned the evils petitioner Barcia alludes to does not warrant its nullification (n the words of Mr Fustice :eonardo A Kuisumbing in the 1999 Barcia case, -0a1 calculus of fear and pessimism ))) does not &ustify the remedy petitioner see+s2 that we overturn a law enacted 'y Congress and approved 'y the Chief E)ecutive.