SALIENT FEATURES OF PHILIPPINE COMPETITION ACT

On the 21st day of July 2015, the industry rejoice with the passage of
the Philippine Competition Act. It is one of the policies defined to be important
in the Philippines E-Commerce Roadmap as the country takes steps in
enacting measures to start resolving our Internet connectivity challenges,
among others.

Reading through the salient features, my only worry though is this law can be
abused, by current or traditional players, to impede innovation as new players
may come out with game-changing ideas that will rock the market they are in.
Offer products and services at a price designed for a new or current business
model. Which, by this innovation, may also affect existing players comfortable
on how they do things and the revenue they are getting.

Though the law in the last 3 paragraphs of Section 15 answered this worry by
stating that:

1. The law can’t be interpreted as a prohibition on having a dominant

position in a relevant market or on acquiring, maintaining, and
increasing market share through legitimate means that do not
substantially prevent, restrict, or lessen competition.

2. Any conduct which contributes to improving production or distribution of

goods or services within the relevant market, or promoting technical,
and economic progress while allowing consumers a fair share of the
resulting benefit may not necessarily be considered an abuse of
dominant position.

3. The Philippine Competition Commission will pursue measures that will

promote fair competition.

I have started with the above introduction rather than putting that at the end so
we should be reminded on the need to be vigilant on the implementation of
this law as it can also be used by those who wants to stifle innovation – if only
to cause inconvenience to players taking off in what they have started.

The law’s salient features, based on my appreciation of its provisions, include:

 1. Creation of the quasi-judicial body, the Philippine Competition Commission
(PCC), that will implement the National Competition Policy and attain the
objectives of the law. It shall be composed of a chairperson and four (4)
commissioners serving a term of 7 years without reappointment. Apart from
teaching, they can not be engage in any other type of work or business.
Including running for public office and serve as counsel appearing in any
hearings of the PCC for 2 years (their spouses and relatives too). (Section 5
to 7)

2. The PCA will review proposed mergers and acquisitions. They can prohibit
those that will substantially prevent, restrict, lessen competition in the relevant
market. (Section 12 b)

3. Upon finding and based on substantial evidence, entities that have entered
into anti-competitive agreement or has abused its dominant position, the PCA
can stop or redress the same through issuance of injunctions, requirement of
divestment, disgorgement of excess profit, etc. (Section 12 d)

4. The Department of Justice Office of Competition (DOJ-OFC) shall only

conduct preliminary investigation and undertake all criminal offenses arising
under this act and similar laws. (Section 13)

5. The law prohibits the following acts:

Anti- Agreements 1) Restricting The PCC shall develop a

Competitive between or competition as to Leniency Program to be
Agreements among price, or components, granted to any entity in the
competitors are or other terms of form of immunity from suit or
per prohibited trade;2) Fixing price at reduction of any fine which
(Section 14a) an auction or any of would other be imposed on a
form of bidding, participant in an anti-
including over-bidding, competitive agreement as
bid suppression, bid provided in Section 14 (a)
rotation and market and (b) in exchange for the
allocation, bid voluntary disclosure of
manipulation information which satisfies
criteria and requirements set
by the PCC and DOJ-
OFC.An entity charged in a
criminal proceeding pursuant
to Section 14 (a) and (b) of
this law may enter a plea of
Nolo Contendere in which he
does not accept or deny
responsibility for the charges
but agrees to accept
punishment as if he pleaded
guilty. (Section
36)Administrative penalties in
relation to violation to this law
are: (Section 29 a to d)
Administrative fines found
under Section 14, 15, 17,
and 20 includes:
First offense: Up to 100
million
Second offense: 100 million
to 250 million
Failure to comply with an
order of the PCC – 50
thousand to 2 million.
Supply of incorrect or
misleading information – 1
million.
Other violations – 50
thousand to 2 million pesos.
Criminal penalties entering
into any anti-competitive
agreements as covered by
Section 14 (a) and (b) be
penalized by: (Section 3o)

 Imprisonment from 2
months to 7 years.

 Fine of not less than 50

million to 250 million.
 Agreements 1) Setting, limiting, The PCC shall develop a
 between or controlling production, Leniency Program to be
among markets, technical granted to any entity in the
competitors development, form of immunity from suit or
which have the investment;2) Dividing reduction of any fine which
object or effect of or sharing the market, would other be imposed on a
substantially whether by volume of participant in an anti-
preventing, sales or purchases, competitive agreement as
restricting, or territory, type of goods provided in Section 14 (a)
lessening or services, buyers or and (b) in exchange for the
competition shall sellers, or any other voluntary disclosure of
be prohibited means. information which satisfies
(Section 14b) criteria and requirements set
by the PCC and DOJ-
OFC.An entity charged in a
criminal proceeding pursuant
to Section 14 (a) and (b) of
this law may enter a plea of
Nolo Contendere in which he
does not accept or deny
responsibility for the charges
but agrees to accept
punishment as if he pleaded
guilty. (Section
36)Administrative penalties in
relation to violation to this law
are: (Section 29 a to d)
Administrative fines found
under Section 14, 15, 17,
and 20 includes:
First offense: Up to 100
million
Second offense: 100 million
to 250 million
Failure to comply with an
order of the PCC – 50
thousand to 2 million.
Supply of incorrect or
misleading information – 1
million.
 Other violations – 50
thousand to 2 million pesos.
Criminal penalties entering
into any anti-competitive
agreements as covered by
Section 14 (a) and (b) be
penalized by: (Section 3o)

 Imprisonment from 2
months to 7 years.

 Fine of not less than 50

million to 250 million.

Abuse of Prohibit one or Selling goods or Administrative penalties in

dominant more entities services below cost relation to violation to this law
position abuse their with the object of are: (Section 29 a to
dominant driving competition out d)Administrative fines found
position by of the market;It shall under Section 14, 15, 17,
engaging in a consider whether the and 20 includes:First offense:
conduct that entity or entities Up to 100 million
would involved have no such Second offense: 100 million
substantially object and the price to 250 million
prevent, restrict, established was in Failure to comply with an
or lessen good faith to meet or order of the PCC – 50
competition: compete with the thousand to 2 million.
lower price of a Supply of incorrect or
competitor in the misleading information – 1
same marketing million.
selling comparable Other violations – 50
products. (Section thousand to 2 million pesos.
15a)Imposing barriers
to entry or committing
acts that prevent
competitors growing
within the market in an
anti-competitive
manner. Except those
that develop in the
market as a result of
or arising from a
superior product or
process, business
acumen, legal rights
or laws. (Section
15b)Making a
transaction subject to
acceptance of others
which by nature or
according to
commercial usage,
have no connection
with the transaction.
(Section 15c)
Setting prices or
conditions that
discriminate
unreasonably between
customers or sellers of
the same goods or
services. (Section
15d)
Permissible price
differentials include:
1)socialized pricing for
the less fortunate
sector of the
economy;
2) reflect differences in
cost of manufacture,
sale, delivery resulting
from differing
methods, technical
conditions, quantities
in which the goods or
services are sold or
delivered to the
buyers;
3) Response to
competitive price of
payments, services, or
changes in the
facilities furnished by
a competitor.
4) Price changes in
response to changing
market condition,
marketability of goods
and services, or
volume
Imposing restriction on
the lease or contract
for sale of goods or
services, concerning
where, to whom, or in
what for goods ad
services may be sold
or traded, such as
fixing prices, giving
preferential discounts
or rebate upon such
price, imposing
conditions not to deal
with competing
entities, where the
object or effect is
restrictions is to
prevent, restrict or
lessen competition
substantially. (section
15 e)
Making supply of
particular goods or
services dependent
upon the purchase of
other goods or
services from the
supplier which have
no direct connection
 with the main goods or
services supplied.
(Section 15f)
Direct or indirectly
imposing unfairly low
purchase price for the
goods or services of
marginalized
agricultural producers,
fisher folk, micro and
small medium
enterprises (MSME),
and other
marginalized service
providers and
producers.; (Section
15 g)
Directly or indirectly
imposing unfair
purchase or selling
price on their
competitors,
customers, suppliers,
customers. Provided
that prices that
develop in the market
as a result of or due to
a superior product or
process, business
acumen, or legal
rights or laws that
shall not be
considered as unfair
prices. (section 15 h)

6. In the prohibited sections section of the law though, it defined several

activities that are not unlawful or violation of this Act including:

 Nothing in this Act shall prohibit or render unlawful the following:

 o 1) Permissible franchising, licensing, exclusive merchandising or
distributor agreements such as those which give each party the
right to unilaterally terminate the agreement.(Section 15 e1)

o 2) Agreements protecting intellectual property rights, confidential

information, or trade secrets. (Section 15 e2)

 Limiting production, markets or technical development to the prejudice

of consumers, provided limitations that develop in the market as a result
of or due to a superior product or process, business acumen or legal
rights or law. (Section 15 i)

7. The PCC has the power to review mergers and acquisitions based on
factors deemed relevant. (Section 16)

8. Parties to merger or acquisition agreement where the value of the

transaction exceed 1 billion pesos are prohibited from consummating their
agreement until 30 days after providing notification to the PCC (subject to the
PCC promulgated criteria and processes)

Should the PCC ask for info, the agreement may not be consummated for an
additional 60 days. Total period for review shall not exceed 90 days from initial
notification by the parties. When no decision is released after the said period,
the agreements shall be considered as approved.

All documents submitted to the PCC by parties shall be subject to

confidentiality rule except when consent is provided by concerned parties or
mandatorily required to be disclosed by law or court order or government
regulatory agency.

Note of the following penalties as well:

a) Parties who violate this shall have their agreement be considered as void
and be required to pay an administrative fines of 1% to 5% of the transaction
value. (Section 17)

b) Administrative penalties in relation to violation to this law are: (Section 29 a

to d)

 Administrative fines found under Section 14, 15, 17, and 20 includes:
 o First offense: Up to 100 milion

o Second offense: 100 million to 250 million

 Failure to comply with an order of the PCC – 50 thousand to 2 million.

 Supply of incorrect or misleading information – 1 million.

 Other violations – 50 thousand to 2 million pesos.

c) Violation of confidentiality of information has a fine of 1 million to 5 million

pesos. (Section 34)

9. If the agreements are deemed to be prohibited, the PCC can prohibit the
agreement from being consummated. Although it can still proceed provided it
will heed the changes or until the parties involved enter into legally
enforceable agreements specified by the PCC. (Section 18)

10. In reference to Section 17, the PCC may adopt and publish regulations
relating to transaction value threshold, information to be supplied for notified
mergers and acquisitions, exemptions from notification requirements, and
other rules (Section 19)

11. Mergers or acquisitions that will substantially prevent, restrict, or lessen

competition in the relevant market or in the market for good and services as
determined by the PCC may be prohibited. (Section 20)

12. In reference to section 20, exemptions can be applied when parties are
able to establish either the following:

 Gains in efficiencies are greater than the effects on any limitation on

competition that result or likely result from the merger or acquisition.

 A party to the merger is faced with actual imminent or financial failure

and the agreement represents the least anti-competitive agreement
among the known alternative uses for the failing entity’s assets.

An entity will not be prohibited from continuing to own and hold the stock or
share capital or assets of another corporation which is acquired prior to
approval of this law. Or in acquiring or maintaining market share in a relevant
market through such means without violating this law. However, these
acquisitions should only be for investment and not used for voting or
exercising control, not an attempt to prevent, restrict, lessen competition in the
relevant market. (Section 21)

13. In determining control of any entity the PCC may consider the following:
(Section 25)

 Control is presumed to exist when parents own directly or through

subsidiaries more than 1/2 of the voting power of an entity (except it can
demonstrate that the ownership does not constitute control).

 Control exist when an entity owns one half (1/2) or less of the voting
power of another entity when:

o There is power of more than 1/2 of the voting rights by virtue of an

agreement with investors.

o Power to direct or govern the financial and operating policies of an

entity under a statute or agreement.

o Power to appoint or remove majority of the members of the board

of directors or equivalent governing body.

o Power to cast the majority votes at meetings of the board of

directors or equivalent governing body.

o There exist ownership over or right to use all or significant part of

the assets of the entity.

o There exist rights or contracts which confer decisive influence on

the decisions of the entity.

14. The PCC shall consider the following when determining market dominant
position (section 27):

 Share of entity in relevant market and able fix prices unilaterally or

restrict supply.
  Existence of barriers to entry and the elements which could foreseeably
alter both said barriers and the supply from competitors.

 Existence and power of its competitors.

 Possibility of access by its competitors or entities to its source of inputs.

 Power of its customers to switch to other goods and services.

 Its recent conducts.

 Other criteria.

15. The law also has provisions in determining relevant market (section 24),
anti-competitive agreement or conduct (section 26), forbearance (section 28).

16. The PCC will issue non-adversarial remedies before the institution of
administrative, civil, or criminal action including: binding ruling, show cause
order, consent order. Any documents and information provided in these non-
adversarial remedies cannot be made admissible as evidence in court to the
party providing such. (Section 37)

17. The PCC may summarily punish for contempt by imprisonment not
exceeding 30 days or by a fine not exceeding 100 thousand pesos on any
entity guilty of misconduct in the presence of the PCC in its vicinity as to
seriously interrupt any hearing, session, or proceedings before it. This
includes not complying to summons, subpoenas, refusal to be sworn as a
witness or answer questions or to furnish information when lawfully required to
do so. (Section 38)

18. Decisions can be appealable to the Court of Appeals. The PCC shall be
included as a party respondent to the case. (Section 39)

19. If the violation involves trade and movement of basic necessities and
prime commodities as defined by RA 7581, the fines imposed can be tripled.
(Section 41)

20. The PCC (its officers, personnel, agents) shall not be subject to any action
or claim or demand in connection with any act done or omitted by them in the
performance of their duties and exercise of their powers except for those
actions and omissions done in evident bad faith or gross negligence (Section
42 and 43)

21. The Regional Trial Court shall have original and exclusive jurisdiction for
all cases involving this law. (Section 44)

22. Only the Supreme Court and Regional Trial Court can issue Temporary
Restraining Orders in relation to cases, disputes, controversies instituted by a
private party. (Section 47)

23. Trade Associations shall not in any way be used to justify any violation of
this law. (Section 48)

24. Congressional Oversight Committee on Competition (COCC) shall

oversee the implementation of this law composed of two members each from
the Senate and the House of Representatives. (Section 49)

SALIENT POINTS:
SEC. 2. Declaration of Policy

The efficiency of market competition as a mechanism for allocating

goods and services is a generally accepted precept. The State
recognizes that past measures undertaken to liberalize key sectors
in the economy need to be reinforced by measures that safeguard
competitive conditions. The State also recognizes that the provision
of equal opportunities to all promotes entrepreneurial spirit,
encourages private investments, facilitates technology development
and transfer and enhances resource productivity. Unencumbered
market competition also serves the interest of consumers by
allowing them to exercise their right of choice over goods and
services offered in the market.

Pursuant to the constitutional goals for the national economy to

attain a more equitable distribution of opportunities, income and
wealth; a sustained increase in the amount of goods and services
produced by the nation for the benefit of the people; and an
expanding productivity as the key to raising the quality of life for
all, especially the underprivileged and the constitutional mandate
that the State shall regulate or prohibit monopolies when the public
interest so requires and that no combinations in restraint of trade
or unfair competition shall be allowed, the State shall:

(a) Enhance economic efficiency and promote free and fair

competition in trade, industry and all commercial economic
activities, as well as establish a National Competition Policy to be
implemented by the Government of the Republic of the Philippines
and all of its political agencies as a whole;

(b) Prevent economic concentration which will control the

production, distribution, trade, or industry that will unduly stifle
competition, lessen, manipulate or constrict the discipline of free
markets; and

(c) Penalize all forms of anti-competitive agreements, abuse of

dominant position and anti-competitive mergers and acquisitions,
with the objective of protecting consumer welfare and advancing
domestic and international trade and economic development.

Sec. 3. Scope and Application

This Act shall be enforceable against any person or entity engaged

in any trade, industry and commerce in the Republic of the
Philippines. It shall, likewise, be applicable to international trade
having direct, substantial, and reasonably foreseeable effects in
trade, industry, or commerce in the Republic of the Philippines,
including those that result from acts done outside the Republic of
the Philippines.

This Act shall not apply to the combinations or activities of workers

or employees nor to agreements or arrangements with their
employers when such combinations, activities, agreements, or
arrangements are designed solely to facilitate collective bargaining
in respect of conditions of employment.

Anti-Competitive Agreements (Sec. 14)

 Restricting competition as to price, or components thereof,

or other terms of trade

 Fixing price at an auction or in any form of bidding

including cover bidding, bid suppression, bid rotation and
market allocation and other analogous practices of bid
manipulation

 Setting, Kmiting [sic], or controlling production, markets,

technical development, or investment

 Dividing or sharing the market, whether by volume of sales

or purchases, territory, type of goods or services, buyers or
sellers or any other means

Abuse of Dominant Position (SEC. 15)

 Selling goods or services below cost with the object of

driving competition out of the relevant market

 Imposing barriers to entry or committing acts that prevent

competitors from growing within the market in an
anticompetitive manner
 Making a transaction subject to acceptance by the other
parties of other obligations which, by their nature or
according to commercial usage, have no connection with
the transaction

 Setting prices or other terms or conditions that discriminate

unreasonably between customers or sellers of the same
goods or services, where such customers or sellers are
contemporaneously trading on similar terms and conditions,
where the effect may be to lessen competition substantially

 Imposing restrictions on the lease or contract for sale or

trade of goods or services concerning where, to whom, or in
what forms goods or services may be sold or traded, such as
fixing prices, giving preferential discounts or rebate upon
such price, or imposing conditions not to deal with
competing entities, where the object or effect of the
restrictions is to prevent, restrict or lessen competition
substantially

 Making supply of particular goods or services dependent

upon the purchase of other goods or services from the
supplier, which have no direct connection with the main
goods or services to be supplied

 Directly or indirectly imposing unfairly low purchase prices

for the goods or services of, among others, marginalized
agricultural producers, fisherfolk, micro-, small-, medium-
scale enterprises, and other marginalized service providers
and producers

 Directly or indirectly imposing unfair purchase or selling

price on their competitors, customers, suppliers or
consumers

 Limiting production, markets or technical development to

the prejudice of consumers