A new competition law at last!

(Third of 3 parts)

The new Competition Law adopts voluntary compliance (vs the tedious litigation process) as its main implementing mechanism. It seeks to do this by making available non-adversarial administrative remedies before the PCC.

An example is a request for a binding ruling where an entity that is in doubt whether its contemplated act is in compliance or violation of the law can request for a binding ruling from the PCC. Another example is the concept of consent order where an entity which is in violation of the law can propose to modify or restructure its act to make it compliant with the law. Likewise, an entity may provide justification to the commission after receiving a show cause order why it should not be made to cease and desist from continuing with an identified business conduct, or pay the administrative fine, or readjust its business practices.

To prevent businesses from being unduly harassed, the law provides that resort to these non-adversarial administrative remedies must first be made before any administrative, civil and criminal actions are filed against the parties concerned.

Forbearance and leniency

The law contains a forbearance provision under which the commission can, under certain conditions and for a limited period, exempt certain acts from the provisions of the law. It, however, requires the PCC to conduct a public hearing to help determine whether or not to give the exemptive relief and if granted, the order granting it must be made public. The commission may prescribe conditions to the relief to ensure the long-term interest of consumers.

Also available is a leniency program in the form of immunity from suit or reduction of fine which would otherwise be imposed on a participant in an anti-competitive agreement, upon compliance with certain conditions such as voluntary disclosure of information regarding the anti-competitive agreement, prompt and effective action to terminate participation therein and cooperation with the commission. The grant of leniency or immunity is not limited to proceedings before the commission but is also available before the Office of Competition of the Department of Justice in the event there is a preliminary investigation pending before it.

Administrative fines

In lieu of criminal penalties, the law follows the “hit-where-it-hurts” principle by prescribing heavy administrative fines on violators. For the first offense, the fine can be as much as P100 million and up to P250 million for the second offense. The fines will be increased every five years to maintain their real value.

Where the violation is failure to comply with the compulsory notification requirement for mergers and acquisitions, the administrative fine is between 5 and 20 percent of the transaction value.

If the concerned party fails to comply with a ruling, order or decision of the PCC within 45 days from receipt of thereof, a daily fine of up to P2 million will be imposed.

Treble fine

There were proposals to follow the treble damage concept adopted in the United States where a violator of the law is liable to a private party for triple the amount of damages that he suffers as a result of the violation. However, consistent with the law’s policy to adopt administrative remedies as its main implementing mechanism, the law opted for triple fine but only in instances where “the violation involves the trade or movement of basic necessities and prime commodities as defined by RA 7581, as amended.”

Criminal, civil liabilities

An entity that enters into anti-competitive agreement prohibited by the law will be subject to criminal and civil liability for damages. The criminal penalty is imprisonment from two to seven years, and a fine of not less than P50 million but not more than P250 million for each violation. When the entity is a juridical person, the penalty of imprisonment will be imposed on its officers, directors or employees holding managerial positions, who are knowingly and willfully responsible for such violation.

Also, a private party who is injured by the violation may file an independent civil action for damages.

Unlike anti-competitive agreements which are subject to criminal penalties, other violations of the PCA are subject only to the administrative fine and civil liabilities under the law.

Transitory period

If there is any existing business structure, conduct or practice that is in violation of the law, the concerned entity is given two years from the effectivity of the law to cure the violation. Only if the violation continues after the two-year curative period will the guilty party be subjected to administrative, civil and criminal liabilities under the law.

The PCA, which was signed to law by President Aquino on July 21, 2015, provides a delicate balance between promoting consumer interest and level playing field in the market and the need of our emerging economy to respond to international competition.

The PCA endows the PCC with vast powers. While these powers must be used to achieve the salutary objectives of the law, they can also be abused by unscrupulous officials of the PCC for their selfish ends. Now that the President has succeeded in the herculean task of persuading Congress to enact this law after more than two decades in the drawing board, the next challenge for him is to choose the right people to wield the vast powers and discharge the responsibilities under the law.

These people must not only be morally upright and technically competent, but must also know how to deal with big business. They must have credibility and the respect of business to help achieve the law’s salutary objective of encouraging business to voluntarily comply with the law as its main implementing mechanism.

The law has lofty objectives but the big question is whether it will really operate the way Congress envisioned it to work.

(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])