A new competition law at last!

(First of 3 parts)

Before Congress went into recess about two weeks ago, the Senate and the House of Representatives ratified the bicameral conference committee version of a new antitrust law, to be officially known as the Philippine Competition Act (PCA), for the country.   The bill is expected to be signed by President Aquino before his State of the Nation Address (Sona) in July.

It took Congress more than 20 years to pass a competition law. I vividly remember having attended Senate committee hearings presided by former President GMA as a senator in the early 1990s. Since then, I took special interest and got involved in the formulation of the law, having practiced antitrust law when I worked in a law firm in Washington, D.C. and being of the belief that we need a good one for the country.

The antitrust bills that found their way in Congress proposed to adopt different policy approaches—from the very strict ones to the very liberal ones. After several Congresses, our present Congress passed what I think is a balanced version that takes into account the welfare of the consumers without sacrificing the need of our businesses to expand to make them competitive with their counterparts in the region.

Scope, application

The law applies not only to acts committed in the Philippines but also to those done offshore that have direct, substantial and reasonably foreseeable effects in the country.

The PCA creates a powerful independent commission called the Philippine Competition Commission (PCC), headed by a chair and four commissioners who enjoy a seven-year security of tenure. To attract competent staff for the commission, the PCA exempts them from the Salary Standardization Law and grants them indemnity and immunity privileges.

The PCC has to be organized within 60 days from the effectivity of the law. Once organized, the PCC has 180 days from the effectivity of the law to promulgate the law’s implementing rules and regulations.

The law expressly grants the PCC original and primary jurisdiction to enforce and implement the law even with respect to entities that are under the regulatory jurisdiction of specialized government agencies. It has the power to stop a merger or acquisition, issue divestiture and adjustment orders, and deputize government agencies and enlist their assistance as well as that of private institutions to implement the law. Orders, rulings or decisions of the PCC are immediately executory, unless otherwise stayed or restrained by the Court of Appeals or the Supreme Court.

To prevent entities from being subjected to multiple investigations by different government agencies endowed by other laws with competition authority, the PCA adopts what we called during the bicameral conference proceedings as “no parallel action.” It expressly states that the PCC shall have sole and exclusive authority to initiate and conduct fact finding or preliminary inquiry on possible violations of the law. The law limits the power of the Office of Competition under the Department of Justice to conducting preliminary investigation and undertaking prosecution for criminal violation of the law.

Anticompetitive conduct

The PCA adopts both the per se rule and rule of reason analysis as the interpretative mechanism for the law. However, the principal interpretive mechanism is the rule of reason analysis which admits of justifications to explain away possible violations of the law. Per se violations, or acts that are deemed violations of the law by the mere fact that they are committed, are limited to price fixing and bid rigging committed between or among competitors.

The law adopts the concepts of relevant geographic market and relevant product market to determine whether an entity commits an anti-competitive conduct in violation of the law.

Unlike antitrust laws in some countries, the law does not prohibit monopolies or market dominance. What it prohibits is anti-competitive agreements “between or among competitors” and abuse of dominant position. The law presumes entities with at least 50 percent market share as dominant players.

Examples of abuse of dominant position is predatory pricing, which is selling goods or services below cost with the object of driving competition out of the market or imposing barriers to prevent market entry of new players or preventing existing players from increasing their market share.

The law adopts the single economic entity concept to determine whether related entities (such as the parent company and its subsidiary or between or among subsidiaries) are competitors under the law.

Cognizant of the need for our businesses to be internationally competitive, the law does not prohibit existing dominant market players from further increasing their market share through superior services or processes, quality products, exercise of legal rights and the like. Noteworthy to mention is that the law does not outlaw exclusive merchandising or exclusive distributorship agreements which are very popular in the Philippines.

(To be continued)

(The author is a professor in the Ateneo Law School and a senior partner of the ACCRA Law Offices. The views in this column are exclusively his. He may be contacted at [email protected])