DOJ’s Office for Competition under the Philippine Competition Act

A reaction to my Dec. 31, 2015 column is that pending the organization of the Philippine Competition Commission (PCC) under the recently enacted Philippine Competition Act (PCA), notification should be made to, and favorable ruling obtained from, the Office for Competition under the Department of Justice (DOJ-OFC) for mergers and acquisitions.

The proponents for this view cite the Memorandum of Agreement dated July 23, 2014 (MOA) entered into between the Department of Justice and Securities and Exchange Commission pursuant to  Executive Order No. 45, series of 2011.

In particular, Executive Order No. 45 provides that “[t]he  DOJ is hereby designated as the Competition Authority” and “created the Office for Competition under the Office of the Secretary of Justice  to carry out the duties and responsibilities” of the DOJ as the competition authority.

The view that DOJ-OFC notification and clearance requirement should be complied with is apparently  based  on section 5 of the PCA,  which seems to imply that the DOJ-OFC ceases as the competition authority only “[u]pon establishment” of the PCC. Section 5 provides: “Upon establishment of the Commission, Executive Order No. 45 designating the Department of Justice as the Competition Authority is hereby amended. The Office for Competition (OFC) under the Office of the Secretary of Justice shall however be retained, with its powers and functions modified pursuant to Section 13 of this Chapter.”

Others argue the contrary point.

First, the PCA expressly limited the powers of the DOJ-OFC under Executive Order No. 45 to investigating and prosecuting criminal violations arising from the PCA and other competition-related laws.

To be sure, section 13 of the PCA expressly provides:  “The OFC under the Department of Justice (DOJ-OFC) shall only conduct preliminary investigation and undertake prosecution of all criminal offenses arising under this Act and other competition-related laws ….”  Note the word ‘only,’ which was inserted by the bicameral conference committee to avoid any misunderstanding about the legislative intent to restrict the powers of the DOJ-OFC.

Secondly, the PCA expressly created the PCC as the country’s competition authority to replace the DOJ-OFC.  In fact, the DOJ-OFC was almost abolished by the bicameral conference committee but the committee agreed to accommodate the DOJ’s request to retain it with the express understanding that its powers shall be limited to investigating and prosecuting criminal violations of competition laws.

The fact that the PCC has not yet been organized should not matter because the PCA has become effective as a law as early as  Aug. 5, 2015.  Executive inaction does not render a validly enacted law less effective or enforceable, so to speak.

Thirdly, both E.O. 45 and the MOA  are of doubtful legal validity. The creation of a competition authority and imposition of merger control are substantive matters which only Congress can do under the Constitution.  Interestingly, in particular reference to merger notification, these are imposed by laws in other countries. Examples are the Hart-Scott-Rodino Act in the United States and the Enterprise Act of 2002 in the United Kingdom.

Fourthly, section 55(e) of the PCA expressly includes  Executive Order No. 45 in the repealing clause of the new law.

In this regard, while the PCA  does not, arguably, repeal but merely amends EO No. 45 as it expressly recognizes the continued existence of the DOJ-OFC, it expressly provides that its “powers and functions [are] modified pursuant to Section 13” of the Act which, as stated above, limits the PCC’s  powers to conducting preliminary investigation and prosecution for criminal violations of the law.

Indeed, as of this writing, we are informed that the SEC is no longer insisting on a prior clearance from the DOJ-OFC as a condition for its approval of mergers.

That’s excellent news but to prevent unnecessary issues, the better course of action is for the President to immediately organize the PCC as mandated by the PCA.

That, indeed, is one of my New Year’s wishes for the country! (The author is a senior partner of ACCRALAW and a professor in the Ateneo Law School. The views in this column are exclusively his and may not be attributed to the institutions he is associated with. He may be contacted through [email protected])