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South East Asia: Philippines

Enforcement Agency:

Bureau of Trade Regulation and Consumer Protection

www.dti.gov.ph/dti/index.php?p=181

Competition law:

 
Key Features of the Law
Prohibition against anticompetitive mergers  
Merger regime suspensive (if threshold met)
Prohibition of collusive agreements  
Leniency policy  
Prohibition applying to vertical conduct  
Prohibition against unilateral conduct (eg abuse of dominance)
Criminal sanctions  
Private rights  
 
Competition in Philippines - Market Overview

Anti-trust has long been part of the Philippine legal system starting with Articles 543 to 545 of the Old Penal Code then enforced by the Spanish regime. During the American occupation, in 1917, the Philippine Legislature enacted Act No. 3247 entitled An Act to Prohibit Monopolies and Combinations in Restraint of Trade understandably based on the Sherman Act of the United States. Upon Philippine independence in 1935, however, Act No. 3247 was repealed by the Revised Penal Code which reverted to providing penalties for machinations, monopolies and combinations but deleting treble damages.

Despite the early start and the fact that the 1987 Philippine Constitution has re-affirmed the State’s mandate to regulate or prohibit monopolies, combinations in restraint of trade and other unfair competition practices, for the sake of public interest, there is presently no comprehensive competition law in the Philippines. What it does have are several anti-trust legal provisions, ranging from the general to very specific ones, scattered among various unrelated sector-specific statutes.

As mentioned, the Revised Penal Code treats as criminal certain acts deemed to be monopolistic or in restraint of trade such as:

  1. entering into any contract or taking part in a combination in restraint of trade or commerce to prevent by artificial means free competition in the market;
  2. monopolizing any merchandise to alter the price by spreading false rumors or making use of any other article to restrain free competition in the market; and
  3. making transactions prejudicial to lawful commerce or increasing the market price of any merchandise.

The more recent Price Act patterned after the Clayton Act of the United States, also penalizes price manipulation in three forms namely:

  1. hoarding or the undue accumulation of prime commodities beyond normal inventory levels;
  2. profiteering or selling at a price grossly in excess of the good’s true worth; and
  3. cartel or combining to artificially and unreasonably manipulate prices.

There is prima facie existence of a cartel whenever two or more persons or businesses in competition perform uniform, complementary or simultaneous acts to bring about artificial prices. The Intellectual Property Code likewise imposes criminal penalties on acts of infringement of a registered mark and unfair competition. Examples of unfair competition are selling goods which have been given the general appearance of the goods of another as to deceive the public and defraud the legitimate owner; making false statements or acting in bad faith to discredit the goods of another; or inducing the false belief that one is offering the services of another.

On the other hand, the Civil Code of the Philippines of 1950 allows, in general terms, the recovery of damages arising from unfair competition in agricultural, commercial or industrial enterprises or in labor. Note, however, that for the offending party to be liable for damages, he should have acted through the use of force, intimidation, deceit, machination, or any other unjust, oppressive or highhanded method subject to proof of clear and convincing evidence.

More specific provisions dealing with competition are those found in the Electric Power Industry Reform Act of 2001 which provides for de-monopolization and shareholding dispersal in distribution utility and holding companies. Thus, holdings of persons shall not exceed 25% of voting shares of stock unless the utility or holding company or controlling stockholders are already publicly listed. Additionally, no participant in the electricity industry may engage in any anti-competitive behavior such as cross-subsidization, price or market manipulation, or other unfair trade practices detrimental to the encouragement and protection of contestable markets. The Energy Regulatory Commission (ERC) is tasked to enforce safeguards against anyone owning, operating or controlling more than 30% of the installed generating capacity of a grid, or 25% of the national installed generating capacity and to monitor and penalize any market power abuse or anti-competitive or discriminatory act or behavior in the electric power industry. The ERC has the power to impose price controls, issue injunctions, requirement divestment or disgorgement of excess profits and impose fines and penalties. Similarly, the Downstream Oil Industry Deregulation Act of 1998, ensures fair competition and prevents cartels and monopolies by providing penalties for persons engaged in any act to fix prices, restrict outputs or divide markets, or are into predatory pricing.

As could be seen, except perhaps for the ERC in the case of the electric power industry, the prosecution of persons engaged in anti-trust or unfair competition behavior as well as recovery of civil damages arising there from is the primary responsibility of the private offended party. While the Department of Justice supervises the prosecutorial service for all criminal complaints in the country, it does not function like a trade board or commission dedicated to the enforcement of anti-competition legal provisions. Apart from this lack of specialized implementation and the absence of a cross-sector or comprehensive law against monopoly, there is also a dearth of jurisprudence on the matter. So far, the most important one is where the Philippine Supreme Court had denied a petition to declare null and void the amended by-laws of a big manufacturing company which would disqualify any stockholder from being nominated to its board of directors when he is engaged in a competing business. The Supreme Court 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. It further said that when a competitor, has access to the pricing policy and cost conditions of the products of the company, the essence of competition in a free market for the purpose of serving the lowest priced goods to the consuming public would be frustrated. In another case, the Supreme Court determined that an exclusivity clause which prohibited the sales personnel of a direct selling enterprise from carrying or selling its competitor’s products, was not per se void and only that whose probable effect was to foreclose competition within a substantial share of commerce can be considered void for being against public policy.

No less than the Supreme Court has said that there is a need to recast our laws on trust, monopolies, oligopolies, cartels and combinations injurious to public welfare to restore competition where it has disappeared and to preserve it where it still exists. For the past 20 years, Philippine lawmakers have attempted to pass bills to either strengthen existing legal provisions on anti-trust or come out with a comprehensive anti-competition legislation like those of their Asian counterparts.

ACCRALAW is a top-tier full-service law firm in the Philippines with headquarters in Makati City and two full-service branches in Cebu City and in Davao City. The Firm has a track record as the country’s leading law firm in anti-trust, corporate, litigation and dispute resolution, labor and employment, and intellectual property practice. Throughout its 40 years, ACCRALAW has been consistently cited for its sterling performance, in international publications such as PLC Which Lawyer? Asia law, Asian-Counsel Chambers Global Chambers Asia, Asia Pacific Legal 500. The Firm is linked to global networks of correspondent lawyers, law firms and bar associations. It is known for its creative and strategic legal solutions matched with cost-efficient administration and expert handling of clients' requirements.

Click here to visit our website

 

Lead Contact: Patricia-Anne T. Prodigalidad

Partner

For more information on how we can help, please contact Patricia-Anne T. Prodigalidad:

T: (632) 830-8000

E: ptprodigalidad@accralaw.com

 

Competition Law and ACCRALAW

ACCRALAW has the most extensive and varied experience in handling anti-trust matters in the Philippines. It represented a big multinational in a matter involving the validity of its by-law’s anti-competition clause where the Supreme Court laid down a landmark ruling in Philippine jurisprudence. It has represented major firms engaged in vital industries, and collaborated with foreign counsels, in connection with anti-trust proceedings abroad. Consequently, the reputation of the Litigation and Dispute Resolution Department of ACCRALAW in the handling of intra-corporate disputes and takeovers, and anti-trust proceedings, has remained unsurpassed. ACCRALAW also pioneered in the handling of unfair competition cases arising from infringement and piracy. Presently, its Intellectual Property Department renders legal services to the world’s leading brands. The Corporate and Special Projects Department has given extensive advice on the Safeguard Measures Act and the Electric Power Industry Reform Act for various foreign and local clients. Since the 90’s, ACCRALAW has taken part in discussions and studies relative to the continuing legislative efforts toward the passage of a comprehensive and updated anti-monopoly and competition law for the country.

 
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