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Competition Policy Briefing Paper

Competition Policy Briefing Paper

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A Policy Briefing Paper

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Competition Policy

A Policy Brie ing Paper: COMPETITION POLICY Asian Institute of Management August 18, 2011 by the Center for Media Freedom and Responsibility in partnership with the Asian Institute of Management Policy Center with a grant from the National Endowment for Democracy

COPYRIGHT ©2011 Center for Media Freedom and Responsibility

TABLE OF CONTENTS
Introduction.................................................................................................... Overview and Background
Competition: What Is It All About? .............................................................. Competition Policy: Why Does It Matter? ................................................... Time for Anti-Trust ......................................................................................

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6 9 11

Tracking the Legislation
Competition Policy Issues in the Countries of Asia: The Philippines ....................................................................... Existing Philippine Competition Laws and Pending Legislation .................................................................................................... Focus on Senate Bills .................................................................................

15 17 20

Multisectoral Perspectives
Competition Experience in the Philippines: Cement Cartel ......................................................................................................................... Philippines: Competition Law, Policy Hope to Curb Monopolies, Cartels ................................................................... Journalism and Competition .......................................................................

25 34 37 41

Conclusion and Recommendations ............................................................ CMFR Media Forum on Competition Policy
Speakers ................................................................................................................................... Participants .............................................................................................................................

42 43

Annexes
Executive Order No. 45 ...................................................................................... House Bill No. 4835 ............................................................................................ Senate Bill No. 1 ................................................................................................. 45 48 74

INTRODUCTION
This is not the irst time for the Center for Media Freedom and Responsibility (CMFR) to engage the press in the discussion of policy and its coverage. A CMFR program in the early 2000s initiated roundtable discussions on mining, the environment (The Clean Air Act), federalism and parliamentary government. CMFR also conducted a training program on reporting policy news in 2004. The aim is to help the media to understand the policy making process which is central to good government. These efforts show the dif iculty of promoting policy news as a critical part of the news agenda. The conventions of journalism focus on reporting events. The policy process is often left unreported, unless the debates of proponents gain in con lict and color as when policy divisions become sharp and become controversial. When this happens, the coverage relies on the exchange of quotes and soundbites. The policy process is always relevant or signi icant as the outcome affects the public. But it is not easy to make policy news interesting. But it is actually more important to provide news about the process before legislation is past and policy is cast in stone. The time to engage the public is when the policy is still being debated, to make sure citizens understand the pros and cons, the gains and losses involved in policy decisions. In this series of policy forums, CMFR took up freedom of information (FOI), presenting the different versions of the bill being discussed in the executive department as well as in the 15th Congress. This program was supported by a grant from the National Endowment for Democracy and in partnership with the Asian Institute of Management Policy Center (APC) headed by Dr. Ronald Mendoza. The second forum focused on competition policy and the concern for fair competition and trade, a huge and highly complex subject. This brie ing paper includes discussions and analyses from experts who have been involved in studies and reports on various aspects of competition policy, just as the discussion was designed to give the media and the public an overview and background on the issues involved in competition and to consider the practical impact of competition on the public. The forum also presented the relevant bills iled in Congress. CMFR also reviewed the recent coverage of the issues which touch on competition policy. Most of the reports took up stories re lecting developments in a sector: 1) The oil price disparities, along with the review and critique of the rise in oil/fuel prices; 2) The “Open Skies” Policy; and

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A Policy Briefing Paper: Competition Policy

3) Telecommunications and the acquisition by Philippine Long Distance Telephone Company, Inc. (PLDT) of controlling shares in Digitel Corp. which operates Sun Cellular. (Given the critical place of Short Message Service (SMS)/texting technology in public life, it is not surprising that the developments in this ield have been given more space in the business news.) It is understandable that the interest in one particular aspect of trade be driven by the importance of a particular trade sector. So shifts in oil prices and yes, the price of texting, are well reported. In general, however, the public does not understand how the price of a product can be affected by fair or unfair competition. Because public interest is involved, the media must make sure that there is enough coverage of the full course of competition policy. We hope that this becomes the subject of more talk shows and public affairs programs. The current legislation in Congress covers all sectoral concerns, rationalizing fairness in trade in a way that will bene it the consumer and foster economic ef iciency as well as continued economic growth. So far, the bills now pending in Congress on competition policy and Executive Order No. 45 making the Department of Justice the deciding authority on competition issues such as monopolies, cartels, and trusts have received scant notice in the media. (Please see Annexes.) There has been an accumulation of competition legislation since the 1980s. There are in fact anti-trust and fair trade components in various laws, government rules and regulations. But with the combined weights of both Asia-Paci ic Economic Cooperation (APEC) and Association of Southeast Asian Nations (ASEAN) bearing down on the country’s framework for trade, current legislation may go further, at least in terms of public attention if not in actual passage. The forum also hoped to clarify issues so as to enable the media to better explain them: to give the efforts to broaden competition some traction in the public forum. The purpose then of the policy news program is to make these developments understandable to the media, and, through the media, the ordinary man and woman. CMFR’s partnership with APC draws on the research and expertise of the public policy thinktank about the subject. It was also our purpose to broaden the media discussion with the participation of the academe, government, and business communities as well as civil society organizations.

MELINDA QUINTOS DE JESUS Executive Director Center for Media Freedom and Responsibility

A Policy Briefing Paper: Competition Policy

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OVERVIEW AND BACKGROUND
Competition: What is it all about?
Rafaelita M. Aldaba Philippine Institute for Development Studies Competition policy is a “fashionable” topic these days, and many developing countries and economies in transition are into drafting competition laws. But what exactly is competition law and policy and why does a country need it? Is trade liberalization not enough to ensure competition? Would competition not lead to cutthroat rivalry that eventually results in the death of domestic irms and the dominance of large irms? irms in the market? The answer is that if entry is easy and costless, the potential threat from imports or domestic competitors will make the incumbent irms behave competitively. For instance, as soon as one irm or a group of irms attempts to increase prices of lower quality from the competitive levels, a new irm can come in to serve the market, thereby driving prices back to competitive levels.

Barriers to competition Before one answers these questions, however, one irst needs to understand the concept of Competition, however, can be lessened sigcompetition as explained in the sidebar. ni icantly by structural characteristics, restrictive business practices, and government It is important to recognize that high levels regulatory policies, examples of which are of market concentration as well as the shown in Box 1. These act as barriers to enpresence of monopolies (a type of industrial try. Economies of scale is an example of a structure where there is only one large structural barrier. When there are increasing irm) or oligopolies (where there are a few returns to scale, there is a minimum size that large irms) are not necessarily detrimental irms have to attain if they are to have their to competition. Large irms may achieve a average cost as low as possible. If the minidominant position in the market through mum ef icient scale is so large that only one legitimate ways like innovation, superior irm can serve the entire market, there will production or distribution methods, or be a monopoly as in the cases of public utiligreater entrepreneurial skills. For as long as ties like the distribution of water, electricity, markets remain contestable wherein entry and piped gas. into a market is easy, one can expect large irms in an oligopolistic environment to act Cartel arrangements and mergers that limit independently or monopolies to behave in a competition, meanwhile, are examples of competitive manner. behavioral characteristics or restrictive business practices whereas anti-dumping One may ask: how can there be competitive and investment licensing, among others, are prices if there is only one irm or only a few regulatory barriers.

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A Policy Briefing Paper: Competition Policy

Market power and abuse of dominance The presence of barriers to entry impedes competition and allows irms to acquire and exercise market power. Market power in turn enables irms, unilaterally (in the case of a monopoly) or in collusion with others (as in cartels), to pro itably raise prices and maintain these over a signi icant period of time without competitive response by other existing or potential irms. Market power gives rise to reduced output, higher prices and poorer quality products which harm consumers and other producers. Thus, economic welfare is adversely affected.

consumers believe that what they see are independent offers. By raising prices and restricting supply, however, they deliberately create arti icial shortages, resulting in goods and services becoming completely unavailable to some buyers and unnecessarily expensive for others. These output restrictions cause inef iciency, reduce productivity, result in economic and social harm, and hinder development.

Large irms may further take advantage of their market power by abusing their dominant position or monopolization. They may suppress competition by restricting or foreclosing the entry of smaller rivals through, for example, the increase of the competitors’ For instance, with cartels and collusion, the costs of entering a market or the charging of economic freedom of consumers and po- predatory prices which harms the competitential rivals is taken away. Cartels make tive process.
Box 1: Structural, behavioral, and regulatory barriers to entry Structural: barriers due solely to condi ons outside the control of market par cipants Sunk costs – costs that a firm cannot avoid by withdrawing from the market; they are a sort of entry fee Absolute cost advantage – access to natural resource or human resources Economies of scale – unit cost of produc on falls with increasing output Large capital requirements Network industries – firms that are compe tors share some cri cal facility like transporta on and telecommunica ons Behavioral: represent abuse of dominant posi on where “rela vely large” firms engage in an -compe ve conduct or restric ve business prac ces by preven ng entry or forcing exit of compe tors through various kinds of monopolis c conduct Excess capacity Product differen a on and adver sing Horizontal restraints – cartels or collusion (price-fixing agreements, market sharing territorial arrangements, bid rigging), price discrimina on Ver cal restraints – resale price maintenance, exclusive dealing Foreclosure and exclusion Tac cs to increase rivals’ costs

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Regulatory: barriers imposed by government policies Special permits, license to operate Regula ons influencing the use of some inputs Tariffs, quotas, and other nontariff barriers An -dumping and countervailing du es Discriminatory export prac ces Exclusionary lists Ownership restric ons
Source: A Framework for the Design and Implementation of Competition Law and Policy, the World Bank and the Organisation for Economic Co-operation and Development, 1998.

What is competition? Competition is a process that allows a suf icient number of producers in the same market or industry to independently offer different ways to satisfy consumer demands. Since competition is often equated with rivalry, it pressures irms to become ef icient and offer a wider choice of products and services to consumers at lower prices. A competitive economy enables individuals to exercise economic freedom wherein consumers are able to choose what they value most and entrepreneurs to choose where they want to invest. The competition process allows consumers and producers to make their choices, free of any price ixing conspiracies and monopolistic bullying. As such, consumer welfare increases, resulting in dynamic ef iciency through innovation and technological change.

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A Policy Briefing Paper: Competition Policy

OVERVIEW AND BACKGROUND
Competition Policy: Why does it matter?
Competition policy and law: Is it necessary? The goal of competition policy is to preserve and promote competition through the prevention of restrictive business practices by irms and through the correction of inef icient government regulations. Competition policy seeks to achieve economic ef iciency to maximize consumer welfare. It is consistent with policies that enhance competition in local and international markets like the liberalized trade policy, relaxed foreign direct investment and ownership requirements, and economic deregulation. enhance competition and ensure the low of bene its to consumers.

After more than 20 years of trade liberalization, there still remains various impediments to entry in Philippine industries that continue to undermine the pro-competitive effects of import competition. While trade liberalization may be a precondition for the growth of a free market, it does not, by itself, guarantee effective competition as outlined in Box 2. Effective competition emerges only if trade reforms are accompanied by the creation of competitive market and industry structures. In the presence of high barriers to entry, it is necessary to design safeguards that would Competition policy includes: (1) policies that ensure market contestability and regulate enhance competition in domestic and in- anti-competitive business conduct which can ternational markets, and (2) a competition damage emerging competition. law, also referred to as the anti-monopoly or anti-trust law. Anti-trust law is a clear set of The realities and problems enforceable legal rules applying to commercial tactics, behaviour, and transactions by Promoting competition is a big challenge, especommercial establishments. It is designed to cially because the bene its are long- term and attain the objectives of competition policy. It do not come without problems. Concerns about prohibits irms from attaining or exercising opening up the economy too quickly to comsubstantial market power obtained through petition are understandable. Domestic irms improper means. In this regard, said law does that have high costs and other problems fear not prosecute irms that have gained market that they would be wiped out if ef icient foreign power through legitimate behavior, i.e., skill, competitors were to enter right away. Small foresight, and hard work. It is more concerned domestic irms also worry that they would not with the elimination of abusive monopoly be able to compete with large business rivals. conduct, price ixing and other cartels, and Competition puts relentless pressure on irms, with the prohibition of mergers and acquisi- foreign or domestic, to cut costs to be more tions that limit competition. A competition competitive, which often translates into lost law prevents the setting up of arti icial barri- jobs. All countries experience social and ecoers to entry and helps facilitate market access, nomic disruptions when local irms are unable

A Policy Briefing Paper: Competition Policy

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to compete with foreign or new entrants that have lower costs. The disruption is often highest in developing countries that lack framework laws and institutions necessary for a well-functioning market economy. Competition policy therefore should not and cannot be seen as the answer to every social and economic problem. Other measures such as market retraining and other welfare supports need to accompany competition policy to alleviate dislocations and mitigate the pain of adjustment. What should we do? In the face of the challenges, what should we do and what policy direction should we take? In the last two decades, the Philippines has done substantial economic reforms in terms of deregulation, privatization, and the removal of unreasonable trade barriers. The adoption and enforcement of a transparent competition law and policy is necessary to complement these

reforms. As indicated by the experience of other countries, competition law is the foundation for fostering sustainable competitive markets. In both Houses of Congress, there are currently many proposals for an anti-trust law and regulation and the creation of a Philippine Fair Competition Commission. With some modi ications, the enactment of these laws is the irst step towards the creation and enforcement of new competition laws in the country. Competition should be viewed as a means and not an end in itself. While industrial market structure is an important determinant of business conduct, the policy emphasis should always be on economic ef iciency rather than on size or market structure alone. It should be on business conduct, market power and keeping markets competitive as well as on disciplining, whenever necessary, exercises of market power that reduce output or increase prices.

Box 2: When deregula on and liberaliza on are not enough… [Why compe on policy is necessary] The case of the deregula on of the telecommunica ons industry provides a concrete example of what happens when compe on rules are vague or lacking. While the entry of new players prompted the Philippine Long Distance Telephone Company, Inc. (PLDT) to launch its zero backlog program in installing more telephone lines and resulted in the introduc on of a range of telecommunica ons services as well as price reduc ons in interna onal calls, mobile phones, and paging services, the interconnec on of new players with dominant carrier PLDT was slow and difficult. In telecommunica ons, opportuni es for compe on can be realized only if smooth interconnec on among various telecommunica ons services is possible. Since PLDT was able to exert monopoly power over access to networks, it dictated the pace of interconnec on in the country. Interconnec on costs were high and resulted in various consumer complaints like unsuccessful call a empts and irra onal calling charges. The cement industry provides another interes ng example when price deregula on and import liberaliza on are not enough to promote compe on. Having a history of a government-sponsored cartel in the industry, a high weight-to-value nature, high transporta on and handling costs which offer natural protec on against imports plus the fact that there are no real subs tutes for cement (lumber is more expensive), the industry was able to engage in tacit price fixing as it has increased its prices con nuously since 1999 in a simultaneous manner amidst a situa on of excess supply, overcapacity, and weak demand.

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A Policy Briefing Paper: Competition Policy

OVERVIEW AND BACKGROUND
Time for anti-trust?
Ronald U. Mendoza Asian Institute of Management Policy Center Singapore’s Lee Kwan Yew once quipped that in the Philippines, 99 percent of the population were waiting for a phone line, while the remaining 1 percent were waiting for a dial tone. While this jab was directed at our telecommunications sector, Lee could have just as easily poked at the rest of our monopolized and highly regulated industries then. Sweeping market oriented reforms in the mid-1990s were designed to change this. Deregulation and privatization would get the inef icient and costly government out of key sectors it had no business being in, and instead draw-in competitive, innovative and much more ef icient private sector actors who would in turn compete for market share by providing better services at lower prices. Deregulation would enhance competition, in turn promoting the necessary investments to boost innovation and competitiveness. This would ultimately lead to increasing consumer welfare and bene it taxpayers as well, by lowering the number of loss making and inef icient government controlled corporations. Are consumers (and taxpayers) really any better off today, well over a decade after this deregulation wave? Did competition and competitiveness really increase? Telecommunications, petroleum, and air travel are three industries that are particularly illustrative of the range of outcomes. There are some gains, but also evidence of emerging challenges to promote competition and safeguard consumer welfare. Table 1. Summary of Selected Industry Information
Telecommunications Year of Deregulation Companies before Deregulation Companies after Deregulation 1995 PLDT PLDT (Smart; Talk N’Text-Piltel; Red Mobile-Cure and SunDigitel) and Globeb Mobile Telephony: • 10000 (1994) • 4020 (prior to PLDT-Digitel merger)b • 5800 (after PLDTDigitel merger)c 1998 Shell, Petron and Caltex Shell, Petron, Caltex, SeaOil, Flying V, Total, Jetti, City Oil and UniOil 3427 (1996)d 2846 (2010)d Petroleum 1995 Philippine Airlines Philippine Airlines, Cebu Paci ic, SEAir, Air Philippines, and ZestAir Domestic • 10000 (1994) • 3680 (2010) International: • 2548 (2010)e Airlines

Her indahl-Hirschman Competition Indicatora (Higher values re lect more market concentration; Date or event in parentheses)

3427 (1996)d 2846 (2010)d

Landlines: • 10000 A Policy Briefing Paper: Competition Policy (1994) • 3253 (prior to PLDT-Digitel merger)b • 4479 (after PLDT-

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Digitel) and Globeb Her indahl-Hirschman Competition Indicatora (Higher values re lect more market concentration; Date or event in parentheses) Mobile Telephony: • 10000 (1994) • 4020 (prior to PLDT-Digitel merger)b • 5800 (after PLDTDigitel merger)c Landlines: • 10000 (1994) • 3253 (prior to PLDT-Digitel merger)b • 4479 (after PLDTDigitel merger)c

UniOil

ZestAir

Domestic • 10000 (1994)

Notes: a Her indahl-Hirschman Index prior to and after deregulation, with year in parenthesis. The HHI it is the sum of the squared market shares of the each company in the industry. The index approximates the value zero when the industry has more irms with similar size. A higher value therefore signals potentially weaker competition and more concentration in the industry. For illustration, the US Department of Justice, Federal Trade Commission characterizes an HHI of 1500 and below as “unconcentrated”, 1500-2500 as “moderately concentrated” and 2500 and above as “highly concentrated”. b Shares prior to PLDT-Digitel merger. c Assuming PLDT-Digitel merger. d Data from the Department of Energy. e Data from the Center for Asia Paci ic Aviation (2010); and based on passenger capacity, including international lights.

Telecommunications The telecommunications industry was deregulated in the early 1990s, but Philippine Long Distance Telephone Company, Inc. (PLDT) remained a dominant player due to its control over most landlines. This was further reinforced in 1998, when First Paci ic (owner of Smart) bought control of PLDT (also owner of Piltel), and these companies accounted for a combined share of 68 percent of the cellular telephone subscribers and 43 percent of the installed lines. Competition between PLDT-Smart and Globe kept pricing steady for text messaging, so in real terms (i.e. accounting for in lation), the price of text messaging declined over time, even as it was kept at PhP1 per text message. In 2003, Sun Cellular of Digital Telecommunications Philippines Inc. (Digitel) entered the mobile telecommunications market offering product innovations like “unli” (unlimited) calls and text messaging. While initially challenged by the industry incumbents through the National Telecommunications Commission (NTC),

the NTC upheld Sun Cellular’s entry and it eventually provoked similar product innovations among the incumbents. Intense competition among these companies generated a wider array of product options for consumers, with ever more competitive pricing schemes itting different consumer preferences. Well over 80 percent of the population now has access to mobile telephony—a far cry from the times when it took over a decade to get a landline from PLDT. However, the recent acquisition of Digitel by PLDT raises questions about the state of market concentration in the industry, and in turn, what this might mean for continued product innovation, competitiveness and consumer welfare. A virtual duopoly will emerge from this deal, with PLDT and its af iliates accounting for about 70 percent of the mobile phone market, and Globe serving the remaining 30 percent. Despite deregulation, barriers to enter the industry, including separate franchise requirements for each telecommunications

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sector and limits to foreign participation (40 gas prices, it did not seem to change industry percent cap), prevent further enhanced com- pricing either. Indeed, even as they are now petition. also competing in retail, food and shopping options, the three main industry players still Petroleum dominate—their combined market share still stands at about 77 percent. Deregulated in 1998, the downstream oil industry was initially comprised of three play- Airlines ers: Caltex Philippines (now the marketing and distributing company under Chevron), The civil aviation industry in the Philippines Pilpinas Shell, and Petron (then jointly owned was dominated by Philippine Airlines until by the state-owned Philippine National Oil the government inally opened this sector Company and Saudi Aramco). Today there in 1995. Following the entry of new airlines are several more gasoline suppliers, includ- like Cebu Paci ic, Air Philippines and Asian ing the original three plus SeaOil, Flying V, Spirit (now ZestAir), PAL’s market share Total, Jetti, City Oil and UniOil. was cut in half, declining from 96 percent in 1995 to about 49 percent in 1999. PAL Unleaded gasoline was about PhP12 per liter nevertheless remains a dominant player in while diesel gasoline was about PhP8 per li- the market with about 50 percent market ter during the deregulation—these recently share in recent years, but Cebu Paci ic has reached peaks of about PhP60 and PhP45 re- captured signi icant ground, accounting for spectively. Are these dramatic price increas- about 30 percent market share. es due to deregulation? Recent analysis by the UAP and SGV suggests that, in fact, local Deregulation brought about a surge in dopump prices have not gone up as fast as in- mestic air travel in the country, thanks to ternational indicators for crude oil and its re- more lights and more competitive pricing. ined products. Further, the stock prices of oil The Manila-Iloilo route alone experienced an companies such as Petron and Shell do not 83 percent increase in the number of travelappear to show any marked improvements ers just two years after deregulation. Passenduring the period of study from 2005-2008, gers from Manila to Davao and from Manila when prices at the pump were on an upward to Cebu also shot up by 45 percent and 34 trend. percent respectively during this period. Our own empirical analysis at AIM also shows that much of the change in gas prices at the pump since the deregulation was accounted for by international price movements. In fact, after correcting for the in luence of international prices and a measure of industry competition, gas prices on the margin before and after deregulation are not statistically different. This suggests that while deregulation is not to blame for the dramatic rise in More attractive pricing clearly played a role in successfully contesting market share from PAL. There is also evidence that PAL restricted output—and this was quickly undone by the entry of more players. A recent empirical study suggests that average airfares are about 10 percent lower after liberalization, and that up to 90 percent of domestic airline passengers bene ited from lower fares.

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The industry is not without challenges, however. Competition did improve for the most pro itable routes, but the less pro itable routes (or so-called missionary routes) could be left behind. PAL used to serve these routes through a cross-subsidy between the more pro itable and less pro itable destinations. However, with the break-up of its monopoly, and the apparent focus of the new entrants on the more pro itable routes, up to 11 markets formerly served by PAL have lost airline service.

2500, according to the guidelines of the US Department of Justice and the Federal Trade Commission, they would all be described as “highly concentrated.”

Some market consolidation has also already begun to take place. Indeed, if we were to draw from guidelines on competition policy presently applied in the United States or in the EU, the PLDT-Digitel merger would automatically raise a red lag and trigger closer scrutiny by regulatory authorities, as the worsening of industry concentration indicators could Airport infrastructure is also still inadequate. indicate a rise in market power and possibly In addition, even as new domestic irms have open the door to anti-competitive behavior. shown their competitiveness relative to the once monopoly incumbent, there are some In addition, pricing behavior and product/ concerns that these same irms may be hard- service strategies remain largely unexamined. pressed to compete at the international level, Further market liberalization will also intronotably once the country opens up to ASEAN duce challenges to some industries. Regulacompetitors as part of the country’s “open tory authorities will need to catch up with skies” policy. Industry experts already fore- these developments, utilizing international cast the Philippines could be a key battle- good practices, including more robust anaground for low cost carriers in the region, in- lytical frameworks and technical analyses to cluding AirAsia (Malaysia) and Tiger Airways strengthen regulatory oversight over these (Singapore) once Philippine skies have been evolving industries. opened up. Deregulation does not mean that the governPromoting competition and ment should be absent—only that its role be competitiveness re-focused. Markets can also malfunction, and industries could end up consolidating in The preceding examples provide some evi- ways that undermine competition, innovation dence of consumer gains from deregulation. and ultimately also competitiveness. It is up However, they also lag critical issues, includ- to regulatory authorities to facilitate healthy ing the possible need to maintain healthy competition and improved competitiveness, competition levels, and also competitiveness, in order to safeguard consumer welfare. That across Philippine industries. Indeed the indi- in turn requires professional and technically cator of competition used widely by interna- equipped regulatory institutions with true intional regulators—the Her indahl-Hirschman dependence and real capacity to exercise their index—suggests that the potential for abuse mandate. Given the growing importance of of market power is still present in all three anti-trust issues both nationally and internaindustries examined here (see table 1). Since tionally, more effective and coherent competithe HHI for these industries are well above tion law and policy will be necessary.

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A Policy Briefing Paper: Competition Policy

TRACKING THE LEGISLATION
Competition Policy issues in the countries of Asia: the Philippines
Based on the presentation of Anthony A. Abad of the Ateneo de Manila University School of Law Lawyer Anthony “Tony” Abad, managing director of the Trade Advisory Services (T/A) and lecturer at the Ateneo de Manila University Law School, has been an advocate of competition policy since 1993, and emphasized the importance of the issue. anti-trust laws, for example, have found their way to the Philippine legal system.

The Philippines was one of the irst Asian countries to have an anti-trust law: In criminal law, Articles 186 and 187 of the Revised Penal Code [Act no. 3815 (1932)] penalize He said, “If we want a capitalist democracy, monopolies and conspiracies or combinawe must have a competition policy. It is the tions in restraint of trade, arti icial prevention foundation of a market economy. If we don’t of free competition, and unlawful commerce. have it, we will have an economy that is run by a few, bene its a few, and subsidized by But since 1932, these articles have not been used. We wonder which aspects of this crimimany.” nal law make it dif icult or impossible to enBasically, competition policy is about having force. a choice. Competition is not necessarily fair. When we are injured by anti-competitive But it can lead to fairness. behavior (monopolies or cartels), a civil Competition laws and regulations in the case may also be filed: Philippines Article 28 of the Civil Code (Republic Act According to the 1987 Constitution: “The no. 386 [1949]) allows the collection of State shall regulate or prohibit monopolies damages arising from unfair competition. when the public interest so requires. No combinations in restraint of trade and unfair There are features of competition policy competition shall be allowed.” (Article XII, spread around other laws: the Price Act, the Consumer Act, the Corporation Code, Section 19) the Revised Securities Act, the Intellectual This mandates Congress to legislate a Property Code, and specific sectors. Some competition policy. aspects of competition policy can also be found in international commitments Anti-trust or competition law is actually not (World Trade Organization agreements, new to the Philippines. Old provisions of US Association of Southeast Asian Nations

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agreements, bilateral agreements, and other international agreements) and jurisprudence (“Case law or judicial interpretation is particularly important in de ining unlawful monopolies, combinations in restraint of trade, and unfair competition practices.”).

tition Policy Framework and a Comprehensive Competition Law. This will help level the playing ield: • Through its allocative, distributive and incentive functions, competition can prevent undue concentration of economic power and political in the economic elite.

But what are the problems that we face? Among them are the fact that competition laws remain unenforced; competition issues are resolved piece-meal and inconsistently • Market economy will not only bring higher standards of living but will also (we tend to look at issues by sectors); and have a liberative political effect. there is NO COMPREHENSIVE COMPETITION POLICY. It is also important to note the government’s The problem is essentially the political econ- role which is not to help business people omy of the Philippines (State and Oligarchy avoid competition by awarding them subin Historical Perspective and Political Arbi- sidies, protective tariffs, preferential loans, trariness - Weak degree of culpability in the and other economic crutches but to push and challenge national industry to strive, to legal & administrative spheres). innovate, and to compete with the best in The oligarchy has used the powers of the the world. State to create opportunities for themselves to make even more money without having Philippine development will have to rely on the play of market forces. Free markets – to create social wealth. by nurturing civil society and by imposing their own restraints on the political system The way forward – stimulate popular demands for the rule of We need a Comprehensive National Compe- law and the protection of human rights.

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TRACKING THE LEGISLATION
Existing Philippine competition laws and pending legislation
Based on the presentation of Lai-Lynn Barcenas, associate director of the Asian Institute of Management Policy Center The 1987 Constitution speci ies the goals of the national economy, which are to promote distributive justice as well as inclusive and sustained, and increasing and expanding productivity. These are achieved and implemented through policies that promote competition: Industrialization and full employment; Providing private enterprises optimum opportunity to develop (Article XII, Section 1); Protection of property rights, where all economic agents have the right to own, establish and operate economic enterprises, subject to distributive justice and the common good (Article XII, Section 6). How is competition promoted? Deregulation/Liberalization/Support for small and medium enterprises – Foreign Investments (Republic Act [RA] 7042, as amended by RA 8179) – Banking (RA 8791, and RA 7721) – Telecommunications (RA 7925) – Civil Aviation (Executive Order 219) – Downstream Oil (RA 8479) – Retail Trade (RA 8762) – Electric Power (RA 9136) – Shipping (RA 9295) – Lowering/removal of tariff and non-tariff barriers to trade – Magna Carta for Small and Medium Enterprises (RA 6977, RA 8289)

When we adopt policies that promote competition, and enact laws that liberalize and de- Regulatory barriers to entry regulate, there will always be market abuse. – Limitations on ownership So the Constitution also provides protection – Licensing/franchise against anti-competitive behavior: The remedies against unfair competition • Monopolies, regulated or prohibited as (Revised Penal Code [RPC], Article 186|RA 3247|Civil Code, Article 28|Tariff and Cuspublic interest requires; toms Code, Articles 301 and 302|Intellectual • Combinations in restraint of trade are Property Code, Articles 168 to 169|Price Act, Section 5[3]) are criminal, civil, administraprohibited; and tive, and rate regulation. Prohibited acts in• Unfair competition is prohibited (Article clude: XII, Section 19; Article XII, Section 1).

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– Bid-rigging (RPC, Article 185) – Combinations in restraint of trade – Cartelization (RPC, Article 186; RA 8479, Section 11; RA 7581, Section 5 [3]) – Monopoly to restrain free competition – Horizontal agreements (not clear about vertical agreements) – Price ixing (RPC, Article 186) – Patent infringement and false representation of product (IPC 155,168 to 169) – Predatory pricing (RA 8479, Section 11)

Executive policy on competition Under existing laws, the DOJ is the government legal counsel and advisor as well as the investigator and prosecutor of crimes. Executive Order No. 45 (June 9, 2011) expands this mandate: • • • • Investigate violations of competition laws and prosecute offenders; Enforce competition laws and policies; Supervise competition in markets; Monitor/implement measures to promote transparency and accountability in markets; Prepare reports on competition for industry and consumer guidance; and Promote international cooperation and strengthen Philippine trade relations with other countries.

There are three ways to regulate competition: criminal (Department of Justice [DOJ] – investigation and prosecution; Regional Trial Courts), civil (Courts of competent jurisdic- • tion), and administrative (designated agencies, e.g., Energy Regulatory Commission, • National Telecommunications Commission, Monetary Board). Jurisprudence on competition, in general

Is the DOJ capable of implementing these additional responsibilities?

No criminal action has ever been iled about competition. However, there have been no- Pending House bill on competition table cases such as: The House of Representatives has approved Intra-corporate action (Gokongwei v. on second reading House Bill (HB) No. 4835 SEC, 1979) – Disallowance of inter“Philippine Fair Competition Act of 2011” in locking directors between competing August 2011. Its salient features include: companies • Creation of the Philippine Fair CompetiChallenge against administrative action Commission tion – Public utilities regulation, not – Makes administrative determination anti-competitive (Phil. Ports Authority of violation of the law v. Mendoza, 1985) – Impose ines and penalties – File criminal complaint before the Constitutional challenge – Predatory DOJ pricing pro itable only if market con– Monitors competition in the market tains signi icant barriers to entry (Tatad v. Secretary of the Department of • Prohibited Acts Energy, et al., 1997) – Anti-competitive agreements (horizontal/vertical)

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– •

Price Fixing Bid Rigging Abuse of dominant position Predatory behavior towards competitors Limitation and control of markets Market allocation Arrangements to share markets or sources of supply Price discrimination, with exceptions Exclusivity arrangements Tie-in arrangements Boycott Anti-competitive mergers

both ine and imprisonment In the alternative, amount double the gross gain of violators or gross loss of private injured party Comments and recommendations We should have a clear and developed policy guide (see Constitution). The competition authority must be independent. Its members and staff must possess the highest level of skill and expertise, and of proven probity and independence. There must be automatic appropriation for the agency ( inancial independence). The penalties de ined in the bills could serve as a disincentive to invest and expand. It also provides opportunities for bribery. We should consider structural constraints in the market, as well as administrative weaknesses. We should prioritize administrative actions, strengthen the fact- inding capabilities of the competition authority, and promote awareness through education and information dissemination during the initial implementation of the law.

Fines and Penalties – Administrative: Natural person: not less than PhP10M, not more than PhP50M Juridical person: not less than PhP250M, not more than PhP750M Amount double the gross gain of violators or gross loss of private injured party – Other administrative penalties – Criminal Fines, the same amounts as administrative penalties. Imprisonment not exceeding 10 years, or

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TRACKING THE LEGISLATION
Focus on senate bills
Based on the presentation of Assistant Secretary Geronimo Sy of the Department of Justice When is there no competition? 1. There is a monopoly (except natural monopolies). 2. There is a cartel. The Senate Committees on Trade and Commerce, and Economic Affairs, chaired by Sen. Manuel B. Villar Jr., are in the process of inalizing the Joint Committee Report.

The House of Representatives has approved on second reading House Bill (HB) No. 4835 3. There is combination in restraint of trade. “The Philippine Fair Competition Act of 2011” in substitution of HB Nos. 549, 913, 4. There is regulatory capture—a situation 1007, 1583, 1733, 1980, 3100, 3134, 3244, when a state regulatory agency created 3476, 3534 and 3985. to act in the public interest to regulate a market or industry instead acts in favor The Senate version of the bill addresses of the commercial or special interests of these major issues: particular irms it is charged with regu1. The need for a clear distinction on which lating. prohibitions or prohibited acts are adth ministrative, civil or criminal. Competition policy in the 15 Congress There are ive Senate bills (SB) on competition policy pending in the 15th Congress: • 2. The need to determine the enforcement framework and model for consistency and to obviate any constitutional or legal challenges. SBN 1 “Competition Act of 2011” by Sen. Juan Ponce Enrile, Antonio F. Trillanes IV and Ralph G. Recto 3. The need for a clear evidentiary regime based on prima facie evidence given that SBN 123 “Fair Trade Act of 2011” by Sen. competition cases are inherently dif icult Sergio R. Osmeña III to prove. SBN 175 “Price Act” by Sen. Trillanes SBN 358 “Competition Act of 2010” by Sen. Trillanes 4. The control of irms as a threshold issue SBN 1838 “Monopolies and Combinagiven that it is through irms that control tions in Restraint of Trade” by Sen. Mirior dominance of the market or relevant markets is done. am Defensor Santiago

• • • •

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5. The need to determine the enforcement framework and model for consistency, and to obviate any constitutional or legal challenges. Key provisions of enhanced SBN 1 The objectives are to: • •

Allocate sales, territories, customers or markets for the production or supply of goods or services; or Fix, maintain, control, prevent, lessen or eliminate the production or supply of goods.

Promote and enhance economic ef iciency and free and fair competition; • • Prevent the concentration of economic power in a few persons; and • Penalize unfair trade, anti-competitive con- Enforcement duct and combinations in restraint of trade. • Establishes an Of ice for Competition The law: (OFC) in the Department of Justice (DOJ) with, among others, the following powers: • Is enforceable within the territory of the – Investigate any violation motu proprio Republic of the Philippines; (On its own motion or initiative*), • Applies to all areas of trade, industry, comupon the iling of veri ied complaint merce and all economic activities including by interested party or upon referral international trade; and by concerned regulatory agency; • Covers all irms as de ined, and all agents, – Issue subpoena duces tecum (A writ of icers, employees, partners, owners, diby which a person is required to rectors, consultants, stockholders, repreproduce documents in evidence*) sentatives, managers, supervisors and all and ad testi icandum (A process to other natural persons. compel the attendance of a person in court so that he may give testimony The prohibited acts are: there in.*); – Undertake on-the-spot inspections of • Any conduct with the object or effect of premises; preventing, restricting or lessening compe– Obtain access to books, records or tition: other documents; – Anti-competitive conduct (e.g., price – Conduct administrative proceedings; ixing, bid rigging) – Issue advisory or legal opinions; – Abuse of dominance (e.g., predatory – Conduct preliminary inquiry; behavior, price discrimination) – Institute civil or criminal proceedings. – Anti-competitive mergers • Mandates that the exercise of enforce• Criminalizes any conduct to: ment and regulatory powers by the OFC – Fix, maintain, increase or control the shall be cumulative to the power and auprice for the supply of goods or services; thority of regulatory agencies.
* The Philippine Law Dictionary provided the de initions.

Imposes a ine up to 10 percent of the annual sales or value of the assets of the infringed, whichever is higher. Provides for the extradition of criminal offenders.

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Provides protection against self-incrimination for any person subject of preliminary inquiry or investigation. Excludes privileged communications between lawyer and client from disclosure. Provides immunity from suit or leniency, as applicable, to any person or irm cooperating with the OFC in the course of investigation.

and preliminary mandatory injunctions by courts except the Supreme Court. Executive action

“…it is the government’s duty to ensure that the market is fair for all. No monopolies, no cartels that kill competition. We need an Anti-trust Law that will give life to these principles…”

President Benigno S. Aquino III in his State of Includes administrative sanctions for the Nation Address last July 2010 contempt, failure to comply with orders, and supply of false, misleading or mali- Executive Order (EO) No. 45 cious information. “Designating the Department of JusImposes administrative ines for commistice as the Competition Authority” sion of prohibited acts. The legal basis of EO 45: Speci ies the extent of liability of corporation, partnership, association or other “The State shall regulate or prohibit entity. monopolies when public interest so requires. No combinations in restraint Res judicata effect of inal judgment in a of trade or unfair competition shall be civil or criminal action. allowed.” (1987 Philippine Constitution, Article XII, Section 19) Allows the suspension of administrative, civil or criminal proceedings only upon Act No. 3815 (Revised Penal Code) order of the OFC on proper motion. Prohibited Acts Provides for the institution of private ac- a. Any person who shall enter into any tion (separate and independent civil accontract or agreement or shall take part tion) for the recovery of treble damages in any conspiracy or combination in the and other costs of suit. form of a trust or otherwise, in restraint of trade or commerce or to prevent by Mandates the creation of a specialized arti icial means free competition in the Division of the Court of Appeals to have market; exclusive jurisdiction over appeals from resolutions of the OFC. b. Any person who shall monopolize any merchandise or object of trade or comProhibits the issuance of temporary remerce, or shall combine with any other straining orders, preliminary injunctions person or persons to monopolize and

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merchandise or object in order to alter Executive Order No. 292 (Administrative the price thereof by spreading false ru- Code of 1987) mors or making use of any other article to restrain free competition in the market; “It is the declared policy of the State to (Article 186) provide the government with a principal law agency which shall be both Republic Act No. 4152 (An Act Amending its legal counsel and prosecution arm; Sections 1 and 2 of R.A. No. 2705, as amended, administer the criminal justice system titled “An Act Prescribing the Duties and in accordance with the accepted proQuali ications, and Fixing the Number and cesses thereof consisting in the invesSalaries of the Members of Legal Staff in the tigation of the crimes, prosecution of Of ice of the Secretary of Justice”) offenders and administration of the correctional system” (Book IV, Title III, “…to study all laws relating to trusts, Chapter 1) monopolies and combinations; to draft such legislation as may be necessary to Additionally, DOJ is the principal agency manup-date or revise existing laws to endated to enforce the rule of law and investiable the Government to deal more efgate and prosecute offenders, and serves as fectively with monopolistic practices the central authority for matters requiring and all forms of trusts and combinainternational legal cooperation. tion in restraint of trade or free competition and/or tending to bring about The functions of the DOJ as Competition Aunon-competitive prices of articles of thority: prime necessity; to investigate all cases involving violations of such laws; 1. Investigate and prosecute all violations of and to initiate and take such prevencompetition laws; tive or remedial measures, including 2. Enforce competition policies and laws to appropriate judicial proceedings, to protect consumers; prevent or restrain monopolization 3. Supervise competition in markets and and allied practices or activities of ensure competition laws are adhered to; trusts, monopolies and combinations.” 4. Monitor and implement measures to pro(Section 2) mote transparency and accountability in markets; Act No. 3247 (An Act to Prohibit Monopolies 5. Prepare, publish and disseminate studies and Combinations in Restraint of Trade) and reports on competition; and 6. Promote international cooperation and “...it shall be the duty of the Attorneystrengthen Philippine trade relations. General (now Solicitor General), the Fiscal of the City of Manila and the DOJ-Of ice for Competition provincial iscal, or whoever may act in their stead, to institute proceedings The duties and responsibilities shall be carto prevent and restrain such violaried out by the Of ice for Competition under tions.” (Section 4) the Of ice of the Secretary of Justice.

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The Of ice shall be manned by such number of staff including legal and technical experts, consultants and resource persons to effec• tively and ef iciently pursue its mandate. The OFC in progress • Association of Southeast Asian Nations (ASEAN) – Hosted the ASEAN Inception Workshop on Core Competencies in Com- • petition Policy and Law on Aug. 3-4, 2011

To spearhead future ASEAN conferences on competition in collaboration with GIZ

European Union (EU) – Participated in a consultation workshop with trade and competition stakeholders – OFC included in TRTA 3 – capacity building component Japan International Cooperation Agency (JICA) – Recipient of capacity building program

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A Policy Briefing Paper: Competition Policy

MULTISECTORAL PERSPECTIVES
Competition experience in the Philippines: Cement cartel
Based on the presentation of Rafaelita M. Aldaba of the Philippine Institute for Development Studies Cartels: characteristics & how they work Collusion is the behavior or conduct in which irms agree to coordinate their actions (set prices or quantities to maximize industry pro its). Cartels ix prices or outputs, rig bids, divide markets by allocating customers, territories, or products & supplies. Anti-competition behavior create market power, suppress rival and consumer activities. Arti icial shortages are created leading to ineficiency, reduced productivity, and economic and social harm. How cartels work: • Trade associations: data collection & dissemination, police tacit & explicit agreements Price leadership: dominant irms announce price changes & other irms follow Other opportunities: newspaper interviews, articles in trade publications or speeches

• •

Industry characteristics The product market: • • Homogeneous product Highly inelastic demand: demand for product does not change proportionately with a change in its price; price hike increases revenue despite fall in quantity Few substitutes Capital-intensive Heavy user of energy, resource-based near quarry areas High transport & handling costs, short shelf life Non-tradable product

• • • Convince all signi icant competitors to • raise prices above competitive level and keep them there; • • Not easy to agree on the price because irms have different cost structure; • • No members would cheat by lowering prices; Industry players are few. • To be successful, punishment strategy usually in the form of a price war; and Geographic markets: important in de ining • Firms must be able to keep track of prices market shares & production levels of other irms in the • Northern and Central Luzon, National cartel. Capital Region, Southern Luzon, Visayas, How can a cartel monitor the behavior of its Mindanao members?

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CR4
N. Luzon NCR S. Luzon Visayas Mindanao HHI N. Luzon NCR S. Luzon Visayas Mindanao

1987
100 100 100 100 100 1987 5370 2676 10000 10000 3199

1990
100 91 100 100 94 1990 5081 1547 10000 10000 2701

1996
100 81 100 100 94 1996 5087 1727 10000 3977 3120

1997
100 87 100 100 100 1997 4293 2008 10000 4086 3174

1998
100 88 100 100 95 1998 3962 2213 10000 4318 3011

1999
100 99 100 100 93 1999 3768 2163 4353 3587 2617

US guidelines: above 1800 highly concentrated

(M – Mergers; A – Acquisitions)

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Main Lessons

Exercise great care in formulating competition law taking into account industry characterTrade liberalization is not a substitute istics but also our institutional endowments, for competition law in industries technical capacity, inancial capability. characterized by: high entry barriers, inelastic demand, high transport and logistic WHY CEMENT PRICES REMAIN HIGH DEcosts. SPITE ZERO TARIFFS • Firms have market power which they Rafaelita M. Aldaba are able to exercise Philippine Institute for Development Studies • Weak competition to the detriment of June 2010 consumers Looking at the different economic characterisWithout an effective competition law task tics of cement irms, this Note argues that the of prosecuting cartel is difficult: hard evi- irms can collectively exert market power. This dence, will court accept evidence of implic- has resulted in weak competition to the detriit cartel, leniency program. ment of consumers, particularly small users. Hence, even with the government’s recent zero • House hearing, DTI investigation, crimi- tariff policy on cement imports, cement prices nal case (Price Act) have gone up unabatedly. Without an effective • Prosecution of cartels in countries competition law, the country has very little rewith effective competition law & policy: course against industry collusion and cartel. EU 248 mil euros 23 cement firms inclg La Farge & Holcim (‘98); Germany price The backdrop fixing 660 mil euros 6 firms inclg La Farge & Holcim (‘03); Romania 26 mil Early this year, Sen. Francis Escudero urged euros inc La Farge & Holcim (‘05); Tai- the Department of Trade and Industry (DTI) wan international cartel NT$210 mil- to explain why cement prices surged to P270 lion 21 firms incl Cemex per bag, which is double the price of two years ago (Senate of the Philippines 2010). Final Note Consumers have complained that despite the economic slowdown due to the recent global Competition as a means and not an end inancial crisis, cement prices did not drop. in itself. Focus on economic efficiency rather than on size or market structure This is in contrast to the report (Osorio 2010) alone. The emphasis should be on business that prices of other construction materials like conduct and disciplining, whenever neces- steel fell by 30–60 percent in 2008 while prices sary, the exercise of market power that re- of production inputs like crude fuel dropped duces output or increase prices. from US$140 to $40 per barrel and coal from US$200 to below $100. Not all increases in concentration are inimical to competition; not all monopolies/ In response, the Cement Manufacturers Assooligopolies are inefficient and abusive. ciation of the Philippines (CEMAP) announced

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last month that price increases are necessary despite sluggish demand because manufacturers are seeking to recover high production costs (Ho 2010). Republic, the local associate of La Farge, also announced that it implemented a price hike of P8 per bag in May because of increased operating costs (De Vera 2010a). Holcim, meanwhile, earlier warned of higher prices in the second quarter due to the power shortage in Mindanao (De Vera 2010b). History of perennial price increases In the past ten years, rising cement prices have always been an issue in the country. Both the DTI and the House of Representatives conducted investigations in the early 2000s to look into a possible collusion among members of the alleged cartel. Given the perennial price increases amid excess supply and weak demand during this period, many analysts suspected that a cartel was at work. The industry association, then known as Philippine Figure 1. Cement average monthly prices

Cement Manufacturers Corporation (Philcemcor), countered that the price increases were inevitable due to the irms’ high production costs and inance charges (Aldaba 2002). Figure 1 shows the behavior of the average monthly price per cement bag from January 1993 until December 2009. Cement prices increased steadily during the following periods: 1993 to early 1997, January 1999 to December 2001, and from December 2002 onwards. Note that coinciding with the 1997 Asian inancial crisis, mergers and acquisitions within the industry took place from 1997 to 1998. A continuous drop in cement prices was observed during these years. A safeguard duty of P20.60 per bag on cement imports was also temporarily imposed from November 2001 until the end of 2004. During this time, cement manufacturers agreed with the DTI not to raise prices. Yet, while cement prices brie ly declined until November 2002, they started to increase unabatedly thereafter.

Source of basic prices: Department of Trade and Industry, Philcemcor, and NEDA for earlier years in the 1990s.

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With mounting calls from various sectors to bring down cement prices, the government temporarily removed tariffs on cement for six months through Executive Order (EO) 766 issued in November 2008. After said EO expired in June 2009, EO 819 extended it for another six months. Prices, however, still remained high. In mid-December 2009, prices in Metro Manila and nearby provinces went up to as high as P260 per bag, from P205 per bag in early December, due to an arti icial shortage created as the big three cement companies Cemex, La Farge, and Holcim decided to simultaneously shut down their plants in Antipolo and Bulacan for annual maintenance activities.

crisis and in response to the relatively high domestic prices prevailing in the country.

It seems, however, that traders do ind the business of importing cement too risky and costly. For instance, based on an interview conducted by Isip (2009), the cost of imported cement, including transport and port integration charges, is about P178 per bag. The ex-factory price of locally manufactured cement, on the other hand, is P185 per bag and with mark-up and transport cost of P10 per bag, the retail price is around P205 per bag. Despite this, though, traders consider the price difference between landed cost and ex-factory price as insuf icient to cover the huge risks involved in the cement import Like other homogeneous goods such as sugar business. and lour, cement is often characterized as a market that is prone to price collusion. Even at zero tariffs, traders still consider Moreover, cement is a type of high weight- cement importation a high risk business. to-value product with high transport and According to them, it is not viable due to high handling costs. Hence, it is often classi ied logistic costs and to the fact that local cement as a non-traded good. While potential manufacturers have the market power to competition from imports is important as easily match or underprice imported cement. a mechanism to control market power and In the same interview by Isip (2009), she ensure competition, this is of little practical noted that traders are aware that local value because of the substantial costs of manufacturers can easily bring down their import entry. Cement can be imported in prices in areas where any shipments come in. bulk, but this will entail a bulk handling Moreover, they know that imported cement facility that would require a substantial can only compete with a small segment of the amount of investment. On the other hand, market composed of small users since local shipping cement in bags will entail extra manufacturers have long-term contracts handling costs that could easily translate to with big customers and contractors wherein increases in price. These factors limit the they (local manufacturers) provide special pro-competitive effects of imports on the discounts for bulk sales. industry and provide a natural protection against imports. Cement imports have thus been historically small. Table 1 shows that there were, in Note, however, that substantial imports fact, only two years when imports as a perpenetrated the country in 2000 at 5 percent centage of total domestic supply exceeded tariff as a result of the global excess supply 10 percent. These were in 2000 (13%) and and low prices arising from the Asian inancial 2001 (19%).

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Traders pointed out that the only way for zero tariffs to have an impact on prices is through owner-supplied importation in areas where port integration charges are cheaper. But doubts abound on whether DTI’s plan of bringing in cement through the Philippine International Trading Corporation would be a feasible solution. Is the government ready to pay the high cost of another price stabilization scheme? The Philippines’ recent experience shows that even with the removal of tariffs, competition in the industry has remained weak. In the early 1990s, for instance, cement prices were deregulated, import restrictions were lifted while tariffs were set at a low rate of ive (5) percent. Yet, the high and rising trend of cement prices seems to indicate that previous trade liberalization and even the more recent tariff elimination are not enough to

ensure that markets would perform ef iciently. The industry has remained highly concentrated, with three irms controlling almost 90 percent of the market. Entry barriers are also high because of the large capital requirements needed to operate a cement plant. Moreover, demand for cement is inelastic* which provides another important source of power to irms to control prices. All these characteristics tend to indicate that cement irms can collectively exert market power and their price behavior seems to show that they are indeed able to exercise it. As such, competition has been limited and has negatively affected consumers, particularly small users. The history of coordination in the industry bolsters the presumption that individual irms are not acting on their own and are consciously engaged in implicit coordination.

Table 1. Industry statistics (in million 40-kg bags)

Note: Total sales cover domestic sales and exports. Domestic supply is production less exports. * The price elasticity of demand measures the responsiveness of demand to changes in price. If demand is inelastic (value less than one), a price increase will increase total revenues while if demand is elastic (greater than one), a price increase will decrease revenues (Khemani and Shapiro 1993).

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Figure 2. Monthly percentage change in cement prices (1985 = 100)

Note: Current prices were de lated using construction de lator from the National Income Accounts.

This can be seen in Figure 2 which shows the pricing behavior of the industry, using changes in monthly cement prices (expressed in constant terms with 1985=100) from January 1993 to December 2010. Cement prices are seasonal; they rise during summer and fall during the rainy months. Notice the near uniformity and symmetric price movements throughout the 16-year period illustrated in the igure. The threat of a price war and fear that departure from such behavior may lead to costly price cutting, lower pro it margins, and market instability have prevented irms from engaging in competition. As Philip Roseburg of La Farge Philippines described their behavior (Ferriols 2001): In any industry, you can ight for a bigger market share but someone has to give up that market share…But obviously this wouldn’t work with our competitors here…they will ight and then we get into a bloody battle where everyone ends up bruised. Given the opportunity, yes, we can try and im-

prove our market share. But I don’t want to lose out in the end and trigger another price war…LaFarge has no plans of rocking the boat. We wouldn’t make a run on market share, we want to keep it as stable as possible. In general, monthly price movements have ranged between -10 and +10 percent except for a few outlier years in 1998, 1999, and 2000. Figure 2 indicates that for the years 1993 and 1994, the highest price changes of around six (6)–seven (7) percent took place during the month of March. From 1995 to 2000, price changes peaked during the month of January registering 11 percent in 1995, six (6) percent in 1996, two (2)–three (3) percent in 1997–1998, and 33 percent in 1999. The latter were merger and crisis years when prices were declining. From 2001 to 2009, the largest price changes were registered in April. These ranged from six (6) to nine (9) percent except in 2002 when cement irms promised DTI that they would not increase their prices in exchange for the additional duty imposed on cement

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imports. Implication for policy: need for competition law In countries with strong competition laws, cartels are illegal and are treated toughly. In the Philippines, though, in the absence of a clear, comprehensive, and enforceable competition law, the task of prosecuting cartels has been dif icult. Since the DTI does not directly deal with cartels as a competition issue, it could not penalize anticompetitive behavior. Since the early 1980s, there have been various attempts to legislate new competition laws. However, most of these have remained pending, indicating the lack of appreciation and political will to legislate a comprehensive competition law for the country. During the 11th Congress, there were two House bills that proposed the creation of a fair trade commission. In the Senate, two bills sponsored by Senators Sergio Osmena III and Juan Ponce Enrile were presented. In the 13th Congress, there were three competition bills iled by Senators Osmena III, Manuel Villar Jr., and Enrile. In the recent 14th Congress,

the bill of Senator Enrile was able to move and got approved by the Committee. However, the process has since been stalled at the House of Representatives**. Conclusion The outcome of cartel behavior is against public interest and highly distortive of economic ef iciency. Cartels limit competition and allow irms to manipulate prices to the detriment of consumers and other industry users, including the government. The experience of the cement industry illustrates that trade liberalization does not automatically lead to competition in the domestic market. Given the characteristics of the industry, incentives are present for irms to engage in anticompetitive practices. Thus, removing import restrictions and eliminating tariffs are not enough to ensure competition. One important lesson is the need to accompany trade reforms with measures to increase competition. Without an effective enforcement of competition law, the country has very little recourse against cartels and collusion.

**The Enrile bill aimed to penalize combinations or conspiracies in the restraint of trade and all forms of arti icial machinations that will destroy, injure, or prevent free market competition. In the House, the Cua bill proposed the creation of a Philippine Fair Trade Commission to investigate, gather evidence, and initiate prosecution of those engaged in unfair trade practices.

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References Aldaba, R.M. 2002. Of cartels and collusion: an analysis of the Philippine cement industry. Chapter 3 in Toward a national competition policy for the Philippines, edited by E. Medalla. Makati City: Philippine Institute for Development Studies. Isip, I. 2009. Risky business traders unwilling to import cement despite zero tariff. Malaya. 30 March. Osorio, M.E.P. 2009. DTI vows to act on cement prices. Philippine Star. 30 April.

De Vera, A. 2010a. Republic Cement hikes Senate of the Philippines. 2010. Press Release prices. Manila Times. 4 May. [online]. 8 January. http://www.senate.gov. ph/press_release/2010/0108_escudero1. ______. 2010b. Holcim warns of cement price asp [accessed 1 June]. increase. Manila Times. 26 May. Khemani, S. and D.M. Shapiro. 1993. GlosFerriols, D. 2001. Special Report: Why ce- sary of Industrial Organisation Economics ment prices remain high despite in lux of and Competition Law. Paris: Organisation for cheap imports. Philippine Star. 24 February. Economic Co-operation and Development (OECD), Centre for Cooperation with EconoHo, A.L. 2010. Cement price hikes “necessary”— mies in Transition. Cemap. Philippine Daily Inquirer. May 31.

PIDS Policy Notes are observations/analyses written by PIDS researchers on certain policy issues. The treatise is holistic in approach and aims to provide useful inputs for decision-making. The author is Senior Research Fellow at the Institute. She wishes to thank Mr. Donald Yasay and Ms. Fatima del Prado of PIDS for their assistance in obtaining the data on cement prices. The views expressed are those of the author and do not necessarily re lect those of PIDS or any of the study’s sponsors.

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MULTISECTORAL PERSPECTIVES
Philippines: Competition law, policy hope to curb monopolies, cartels
Anthony Ian “Tonyo” Cruz TXTPower Since its founding in 2001, TXTPower has looked at issues from three perspectives— those of consumers, netizens and citizens. And we do so again as we attempt to make sense of the Competition Authority formed by President Aquino, the competition bills iled in both houses of Congress, and in the face of the reemergence of a monopoly in the telecommunications sector. Remember PLDT monopoly practices? Under a long-running monopoly until the mid-1990s, Filipinos were made to endure years or decades of waiting for the installation of telephone lines, and another long waiting time for the dial tone. Long distance services, especially international calls, were so expensive and we had to line up at the nearest PLDT of ice and calling center. Under a monopoly, only the monopolist prospers and the rest of us experience stunted growth. It would take several years for the public to bene it from RA 7925 in the form of the introduction of prepaid cellular phones, prepaid cards, prepaid IDD, the elimination of national IDD via cellular phones, the introduction of prepaid phone reloading, and the introduction of unlimited call and text services. It is easy to laud the telcos for these bene its, but a closer inspection would reveal that many of these “bene its” accrued to consumers after they themselves for and demanded them.

After telcos cashed in on the deregulation policy unleashed by RA 7925 in the form of unregulated windfall pro its, the mergers and buy-outs started, and consumers again funded these corporate actions as well as a number of bad business decisions made by the corporations. Globe Telecom, would buy Islacom, the country’s irst GSM provider. Today, the PLDT network has under its wings Piltel, Smart, Cure and, of late, DigiThere was no other way for the Philippines tel/Sun Cellular. In the case of Smart, conto improve its telecom sector then than to sumers reportedly subsidized its migration dismantle the PLDT monopoly. from the failed ETACS to GSM. Initial changes and reforms under Republic Act 7925 propelled competition in the telecommunications sector as far as establishing a number of high-capital companies, especially in the cellular mobile telephone system (CMTS) and the wired landline systems. Monopolies and any other anti-competitive business formations are bad for consumers, if only for the simple reason that they mean less number of choices in the market. If and when a monopoly emerges or reemerges, the irst victim is the consumer.

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To clarify, consumers are not against mergers and acquisitions as these are facts of business activity. We however raise serious questions on the legality of the transactions entered into by telcos among themselves. For even as they merge and acquire, consumers still reel from such practices as the charging of arbitrarily-set interconnection fees for calls and texts made across telcos. The problem persists up to this day, driving up the cost of calls and text.

lies are bad for business. Monopolies tell companies, especially small ones, that they cannot aspire to be as big; the latter’s destiny is to be swallowed whole or in part by the rampaging monopolist beast.

Technologically and business-wise, the concentration of ownership of telecommunications infrastructure and franchises under a powerful monopoly poses a number of real and perceived threats and disadvantages to the majority of citizens. From violations of A monopoly captures the market not by pro- the right to privacy to the wholesale “purviding superior products but by the capri- chase” of patents, to exclusive contracts to cious use of the monopolist of his immense acquire telecom equipment, to the use of resources and prerogatives to monopolize closed systems – the list seems endless – the market. and these problems are made worse when they are perpetrated by monopolists. The existence or reemergence of monopolies is even made more scandalous as we see it The President would do well to boost conin the telecommunications sector. It is im- sumer and business confidence by includportant to stress that telecommunications ing in his priority legislative measures the is not just a commodity or a business. It is a enactment of an anti-monopoly and antipublic utility that is imbued with public trust, trust law, or a competition law. makes use of publicly-owned resources and ultimately aims to become an enabler of the The absence of such a law has been misinprogressive goals of the public. terpreted by some as a blanket license to corrupt the telecom sector in particular, This public utility nature of telecommu- and Philippine businesses and industries nications is formally expressed by the tel- in general. The situation does not serve cos’ application for and grant of franchises the interests of the Republic of the Philipby the Congress of the Philippines. With- pines. out such franchises, no company may enter into the telecommunications business. All we have now is a hodge-podge of disFranchises are granted, in theory, only to parate laws that offer no stiff protection to majority Filipino-owned companies which Filipinos in the face of new and reemerghave the vision and the means to “roll out” ing monopolies, or abusive companies, in telecommunications services. the telecom sector and beyond. Addressing this situation will send a message to doGlobally, regionally and nationally, there mestic and international investors that the is continuing rejection of all sorts of busi- Philippines offers fair opportunities, and ness monopolies. Monopolies are not bad does not play favorites, especially to big, for business. The opposite is true. Monopo- moneyed and influential businessmen.

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Please also allow me to address issues raised earlier – I was following the tweets – especially the need for a genuine consumer movement, a consumer union that goes way beyond handing out hao siao awards. We agree. But consumer rights and welfare consciousness is a dif icult task. we face so many hindrances — contempt for complaining and complainants is deep-seated and embedded in schools, and reinforced in media. In the case of the Philippine Long Distance Telephone Company, Inc. (PLDT) buyout of Digitel/SunCellular, we saw most of the media swallow hook, line and sinker the lie or spin that it was/is a done deal. Coverage was largely one-sided and shallow. That doesn’t help and also illustrates the overarching power of economic elites and monopolists viz. media. These are hindrances and stum-

bling blocks – and it would take much persistence, patience, grit, and united action by consumers to be able to form and propel their union and movement. What we want to see, moving forward, in the telecom sector are: (1) a clear vision from the government on the role of information and communications technology in nation-building; (2) vibrant competition on telecom services made available to end-users, MSMEs, government and industry; (3) the provision of internet access to the entire archipelago through a national broadband network free from graft; (4) the dismantling of monopolies and cartel operations in the telecom sector; and (5) the formation of a movement and union of consumers that demand better business practices and better services.

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MULTISECTORAL PERSPECTIVES
Journalism and competition
Roel Landingin Financial Times A search of the word “competition” in BusinessWorld’s online archives through the years, shows a decline since the mid-90s in the number of news headlines which mention the word.

Actually, it is not just journalists who have stopped using the world. A searching on Google of “Philippine Competition” reveals the same trend among book writers, academics, and policy experts.

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This observation on the use of the word competition in literature (books and newspapers) or the state of competition can be further studied. But the renewed interest on competition policy, as evidenced by this forum, is indeed very much welcome. We, journalists, have a professional if selfinterested stake in competition. The greater the competition, the more stories we write about the companies involved. Why do we write more stories about PLDT, Globe, and Digitel compared to Manila Electric Company (Meralco)? It’s not because they place more ads in the media, but because the mobile phone industry, at least before PLDT’s acquisition of Digitel, is competitive, whereas Meralco is a monopoly. So how many stories were being written about Fortune Tobacco and Philip Morris after they merged? I haven’t made a count, but I guess far fewer than before the merger.

So, like many of you, I’m convinced that we need a competition law more than ever and I hope the lawmakers are convinced too. Based on my experience covering industries, particularly utilities, I also think that greater competition is not enough to maximize consumer welfare and ensure economic efficiency. Better regulation and consumer empowerment are also necessary. The Philippines privatized water service in Metro Manila in 1997. The process of selecting the private contractor was very competitive and transparent. At least four companies took part in the bidding, which was open to the public. The initial outcome was a drastic reduction in water rates. So from 8.78 per cubic meter before privatization, it fell up to 4.02 in the eastern half of Metro Manila 7.21 in the western half.

10 9 8 7 6 5 4 3 2 1 0 1992 1993 1994 1995 1996 1997

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However since then, water rates have gone up eight-folds in the eastern section and six-folds in the western section.

45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

I’m not saying the water rate increases are not justified. They may very well be; after all, since 1997 water service has also improved considerably in terms of coverage and reliability. The key question is whether the water rate increases are commensurate to the improvements in water and sanitation services. In principle, we should be assured that this is the case. After all, the private water companies are regulated by the MWSS and its regulatory office, which approve all the water rate increases. However, I begin to wonder when I hear that both Manila Water and Maynilad water services are some of the most profitable units of their respective conglomerates. The composition of the MWSS board under the previous administration and their preoccupation with generous bonuses for themselves and their employees do not inspire confidence in their regulatory deeds. That is why, along with effective regulation, we still need consumer empowerment of which access to information is a key ingredient.

As consumers and journalists, we should be able to find out for ourselves the basics, including the detailed and technical calculations that underscore regulatory decisions. As you know, basic water rates are adjusted or re-based once every five years. So far those have meant big jumps in water tariffs. The last time was in 2008 and 2009, and many of us reported the story then. What is not widely known is that those increases included initial costs for building Laiban and Wawa dams between 2008 and 2012. Well, the MWSS has basically shelved plans for building the two dams and is looking to invite private investors to carry them out as PPP (Public-Private Partnership) projects. Yet our water rates continue to include components to cover the initial costs of building those two water supply projects. Unfortunately, even Congress could not get straight answers on this matter for the past year. This is one case where an access to information law can help advance consumer welfare.

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Greater industry competition is good for us journalists because rivalry yields more stories. But that is also a weakness if we become too dependent on business rivalry or con lict to generate stories. It could lead to a situation where we don’t cover industry or policy issues because of the absence of rivalry or disagreements among the main business players. For example, the question on how telecommunications frequencies are awarded has long igured in academic research on the weak state of competition in the telecommunications industry. However, it seems to me that the issue gained media mileage only recently when Globe raised the issue because of its opposition to PLDT’s acquisition of Digitel.

coverage is structured. These companies are covered by business reporters whereas consumer groups are covered by some other beat reporters, those covering NGOs (non-government organizations) or causeoriented sector. So we have this fragmentation. It’s time for not only reporters, but editors and news managers, to think about reducing the fragmentation that happens in journalism. It is really worthwhile to develop sources and to do stories across different sectors covering different industries.

As journalists we benefit from greater competition because it makes our work easier. But it is in the absence of competition that There is a lack of media coverage on the our readers and consumers need us and consumer sector. It is because of the way good journalism the most.

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CONCLUSION AND RECOMMENDATIONS
Legislation Research is important. It is critical to ensure that legislation be based on evidence. It is necessary to have a thorough and sober analysis of the state of competition in the Philippines as well as the state of current market and economy to make sure that the law is appropriate to the situation in the Philippines. To make legislation truly relevant and useful, the discussions on and the implementation of relevant laws should include all stakeholders (consumers, industry players, government, academe, research institutions, etc.). Experts can get together and provide technical assistance and build capacity to promote competition. The advocacy requires a number of investments as well as longer term engagements. Media Media play a critical role in all the phases of policy making. Reports need to clarify the pros and cons, the gains and losses, so that the public forum can also serve in the search for solutions that address the competitive needs. The institution needs to train itself to favor processrather than event-based news. Media advocacy and journalists’ groups should campaign for more information dissemination and awareness of issues and processes. Public The passage of the law on competition is just the beginning of the problem. The public needs to be informed so people can see for themselves the gaps in implementation and enforcement. The people should be involved not only in tracking legislation as it moves in Congress, where changes can be changed to favor vested interests. The public also needs to be able to check market abuse. For competition policy to be truly effective, consumer welfare groups must be formed and gain strength, to provide the public with the force of collective pressure and action for correction when necessary.

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CMFR MEDIA FORUM ON COMPETITION POLICY
Speakers
Anthony A. Abad Managing Director Trade Advisory Services Rafaelita M. Aldaba Senior Fellow Philippine Institute for Development Studies Lai-Lynn Barcenas Associate Director Asian Institute of Management Policy Center (APC) Anthony Ian Cruz Co-founder TXTPower Melinda Quintos de Jesus Executive Director Center for Media Freedom and Responsibility Roel Landingin Correspondent Financial Times Ronald U. Mendoza Executive Director APC Geronimo L. Sy Assistant Secretary Department of Justice Co-Chair, Senate Technical Working Group on the Anti-Trust Legislation

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Participants
AIM Conference Center Manila – Jigs Abulad – Ma. Afrecita D. Nieva Asian Institute of Management – Edilberto de Jesus – Meg Lee – Anne Ong-Lopez – Meyps Quiñones Asian Institute of Management Policy Center – Steve Almeda – Jhoan Estipular Ayala Young Leaders Alliance – Joseph G. Navarro BusinessWorld – Noemi Gonzales Central Democratic Movement – Diana Afable-Lorenzo Department of Justice – Florina Agtanap Free Legal Assistance Group – Gilda E. Guillermo GMA News Online – JM Tuazon International Center for Innovation, Transformation and Excellence in Governance (InciteGov) – Niel Lim

Kapisanan ng mga Brodkaster ng Pilipinas (Association of Broadcasters of the Philippines) – Reynaldo “Rey” Hulog – Rudolph “Rejie” Jularbal – Ruperto “Jun” Nicdao Jr. Konrad Adenauer Stiftung – Margo Mercado Makati Business Club – Patrick Chua Manuel L. Quezon University – Dianne Jhoy M. Pedroso – Kenneth Rey R. Rentutar – Bayani Santos – Raymond A. Sebastian Minimal Government Thinkers, Inc. – Nonoy Oplas Of ice of Sen. Manuel “Manny” Villar – Sarah Mirasol – Andrei Mortal Philippine Center for Investigative Journalism – Karol Ilagan – Jessa Jarilla – Ed Lingao – Malou Mangahas Philippine Press Institute – Ariel C. Sebellino Polytechnic University of the Philippines – Darlene Apanay – John Paolo J. Bencito – Patrisnia Catilo – Elaine Fallarcuna – Jayen D. San Diego – Vic Rosalio S. Tahud

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Presidential Communications Operations Office – Gilbert Remi Lacsina Puyat Jacinto & Santos Law – Jessica Hilado – Shirley Velasquez

The Manila Times – Krista Montealegre University of the Philippines – E. Patalingauo

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ANNEXES

Executive Order No. 45, s. 2011 MALACAÑAN PALACE MANILA BY THE PRESIDENT OF THE PHILIPPINES EXECUTIVE ORDER NO. 45 DESIGNATING THE DEPARTMENT OF JUSTICE AS THE COMPETITION AUTHORITY WHEREAS, Section 20, Article II of the 1987 Constitution provides that the State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments; WHEREAS, Sections 13 and 19, Article XII of the 1987 Constitution provide that the State shall pursue a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity and shall regulate or prohibit monopolies when the public interest so requires; WHEREAS, recent developments from the World Trade Organization (WTO), the ASEAN Free Trade Area (AFTA), and the trade liberalization initiatives under the Asia Paci ic Economic Cooperation (APEC) forum advocate competition in domestic and international trade; WHEREAS, there is a need to promote competition and level the playing ield in the market; WHEREAS, Republic Act No. 4152 approved on 20 June 1964 vests upon the Secretary of Justice the duty “to study all laws relating to trusts, monopolies and combinations, to draft such legislation as may be necessary to update or revise existing laws to enable the Government to deal more effectively with monopolistic practices and all forms of trusts and combination in restraint of trade or free competition and/or tending to bring about non-competitive prices of articles of prime necessity, to investigate all cases involving violations of such laws, and to initiate and take such preventive or remedial measures, including appropriate judicial proceedings to prevent or restrain monopolization and allied practices or activities of trust, monopolies and combinations”;

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WHEREAS, Act No. 3247 enacted on 1 December 1925 and Article 186 of the Revised Penal Code, as amended, both penalize monopolies and combinations in restraint of trade; WHEREAS, the Department of Justice (DOJ) is the principal legal counsel and prosecution arm of the government under Section 3, Chapter 1, Title III, Book IV of Executive Order No. 292 (Administrative Code of 1987) and also the central authority for matters requiring international legal cooperation; WHEREAS, the DOJ likewise serves as the principal agency mandated to enforce the rule of law and investigate and prosecute offenders; and, WHEREAS, the President, under Article VII, Section 17 of the Constitution; has the power and control over executive departments, bureaus and of ices, as well as the continuing authority under existing laws to reorganize such executive departments, bureaus and agencies. NOW, THEREFORE, I, BENIGNO S. AQUINO III, President of the Philippines, by virtue of the powers vested in me by law, do hereby order: SECTION 1. Designation of Competition Authority. The DOJ is hereby designated as the Competition Authority with the following duties and responsibilities: a. Investigate all cases involving violations of competition laws and prosecute violators to prevent, restrain and punish monopolization, cartels and combinations in restraint of trade; b. Enforce competition policies and laws to protect consumers from abusive, fraudulent, or harmful corrupt business practices; c. Supervise competition in markets by ensuring that prohibitions and requirements of competition laws are adhered to, and to this end, call on other government agencies and/or entities for submission of reports and provision for assistance; d. Monitor and implement measures to promote transparency and accountability in markets; e. Prepare, publish and disseminate studies and reports on competition to inform and guide the industry and consumers; and f. Promote international cooperation and strengthen Philippine trade relations with other countries, economies, and institutions in trade agreements. SECTION 2. Of ice for Competition. There is hereby created the Of ice for Competition under the Of ice of the Secretary of Justice to carry out the duties and responsibilities set forth in Section 1. The Of ice shall be manned by such number of staff including legal and technical experts, consultants and resource persons to effectively and ef iciently pursue its mandate. The Secretary of Justice shall designate the Chief/Head and members of the said Of ice.

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SECTION 3. Funding. To carry out the provisions of this Order, initial funds for the operations of the Of ice for Competition shall be taken from the available funds of the DOJ. Thereafter, such amount as may be deemed necessary for the annual operations of said Of ice, shall be incorporated and included in the annual budgetary appropriations of the DOJ. SECTION 4. Separability Clause. If any provision of this Executive Order is declared invalid or unconstitutional, the other provisions not affected thereby shall remain valid and subsisting. SECTION 5. Repealing Clause. All orders, rules, regulations, and issuances, or part thereof, which are inconsistent with this Executive Order, are hereby repealed, amended, or modi ied accordingly. SECTION 6. Effectivity. This Executive Order shall take effect immediately upon publication in a newspaper of general circulation. DONE, in the City of Manila, this 9th day of June, in the year of our Lord, Two Thousand Eleven. (Sgd.) BENIGNO S. AQUINO III By the President: (Sgd.) PAQUITO N. OCHOA, JR. Executive Secretary

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ANNEXES
Republic of the Philippines HOUSE OF REPRESENTATIVES Quezon City FIFTEENTH (15th) CONGRESS First Regular Session HOUSE BILL NO. 4835 (In Substitution of House Bill Nos. 549, 913, 1007, 1583, 1733 1980, 3100, 3134, 3244, 3476, 3534 and 3985)

Introduced by Representatives Ponce-Enrile, Yap S., Cari, Alvarez A., Apacible, Arroyo D., Macapagal-Arroyo G., Teodoro, Rodriguez R., Rodriguez M. Jr., Garcia A., Benitez, Aumentado, Umali C., Tañada, Gullas, Belmonte F., Mira lores, Golez A., Nograles, Duavit, Biron, Defensor, Treñas, Casiño, Villarica, Mandanas, Fernandez, Garay, Del Rosario A.G., Sacdalan, Joson, Rodriguez I., Lacson-Noel, Yu, Ferrer J., Sahidula, Lagdameo A., Bonoan-David, Mellana, Sakaluran, Quisumbing, Unabia, Batacabe, Colmenares, Herasco, Villar, Pancho, Cojuangco E., Enverga, Cajayon, Tugna, Ty, Romualdez, Gonzales A., Panotes, Bagasina, Durano, Cua, Garin S., Castelo, Javier, Evardone, Bulut-Begtang, Alvarez M., Plaza, Palmones, Magsaysay E., Almario, Bello, Tinio, Rivera, Datumanong, Pangandaman S., and Abaya

AN ACT PENALIZING ANTI-COMPETITIVE AGREEMENTS, ABUSE OF DOMINANT POSITION, AND ANTI-COMPETITIVE MERGERS, ESTABLISHING THE PHILIPPINE FAIR COMPETITION COMMISSION AND APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES Be it enacted by the Senate and the House of Representatives of the Philippines in Congress assembled: CHAPTER I GENERAL PROVISIONS SECTION 1. Title. – This Act shall be known and cited as the “Philippine Fair Competition Act of 2011.”

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SEC. 2. Declaration of Policy. – Pursuant to 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) Promote and enhance economic ef iciency and free, full and fair competition in trade, industry and all commercial economic activities; (b) Prevent the concentration of economic power in a few persons who threaten to control the production, trade, or industry in order to sti le competition, distort, manipulate or constrict the discipline of free markets, increase market prices in the Philippines; and (c) Penalize all forms of anti-competitive mergers, with the objective of protecting consumer welfare and advancing domestic and international trade and economic development. SEC. 3. Scope and Application. – Thus Act shall be enforceable within the territory of the Republic of the Philippines and shall apply to all areas of trade, industry and commercial economic activity. It shall likewise be applicable to international trade having direct, substantial and reasonable 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. The Act shall apply to: (a) all irms as de ined hereunder and all their commercial agreements, actions or transactions involving goods, services or intellectual property; and (b) all agents, of icers, employees, partners, owners, directors, consultants, stockholders, representatives, managers, supervisors, and all other natural persons who, acting on behalf of judicial persons shall authorize, engage or aid in the commission of representative practices prohibited under his Act. This Act shall apply neither to the combinations or activities of workers or employees nor to agreements with their employers when such combinations, activities, agreements, or arrangements are designed solely to facilitate collective bargaining in respect of conditions of employment. SEC. 4. De inition of Terms. – As used in this Act, the following terms shall be de ined as: (a) “Agreement” shall refer to any type or form of arrangement, understanding, undertaking or concerted action, whether formal or informal or tacit, written or oral; (b) “Cartel” shall refer to a combination of irms, providing goods in relevant markets, acting or joined together to obtain a shared monopoly to control production, sale and price, or to obtain control in any particular industry or commodity, or a group of irms that agree to restrict trade. It shall also refer to irms or section of irms having common interest designed to promote the exchange of knowledge resulting

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from scienti ic and technical research, exchange of patent rights and standardization of products among themselves with the intent of preventing, restricting or distorting competition; (c) “Commission” shall refer to the process by which economic agents, acting independently in a market, limit each other’s ability to control the prevailing conditions in the market; (d) “Competition” shall refer to the process by which economic agents, acting independently in a market, limit each other’s ability to control the prevailing conditions in the market; (e) “Control” shall refer to at least twenty percent (20%) ownership, directly or indirectly, of a irm or a group of irms by another irm; (f) “Dominant Position” shall refer to a situation where a irm, either by itself or acting in collusion with other irms, is in a position to control a relevant market for the sale of a particular good or service by ixing its prices, excluding competitor irm, or controlling the market in a speci ic geographical area; (g) “Firm” shall refer to any person, natural or juridical, partnership, combination or association in any form, whether incorporated or not, domestic or foreign, including those owned or controlled by the government, engaged directly or indirectly in any economic activity: Provided, That, two irms, one of which is controlled by the other, shall be treated as one irm: Provided, further, That two or more irms that are controlled by a simple irm shall be treated as one irm; (h) “Goods” and “Services”: “Goods” shall refer to all types of tangible and intangible property that could be bought and sold, and the possession of which could be transferred in whole or in part, temporarily or permanently; “Services” shall refer to the provision of things of value or articles or items that could be used by one person, whether natural or juridical through human interaction or through the use, without transfer of ownership, of the facilities of the provider by the client, or a combination of both. It shall include all non-tangible goods. It is the nonmaterial equivalent of a good, consumed at the point of sale and does not result in ownership; (i) “Market” and “Relevant Market”: “Market” shall refer to a place or venue for commercial activity, which may be a city, province, region, the whole area of the Philippines, or which may extend beyond the borders of the Republic of the Philippines, where articles are bought or sold. It shall also refer to the geographical or economic extent of commercial demand;

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“Relevant Market” shall refer to the line of commerce in which competition has been restrained. It shall also refer to the geographic area involved, including all reasonably substitutable goods, and all competitors, to which consumers could turn if the restraint or abuse results in the signi icant increase in prices. (j) “Mergers” shall refer to two or more undertakings, previously independent of one another, join together. This de inition includes transactions whereby two irms legally merge into one (mergers), one irm takes sole control of the whole or part of another (acquisition or takeovers), two or more irms acquire joint control over another irm (joint ventures) and other transaction, whereby one or more undertakings acquire control over one or more undertakings, such as interlocking directorates; and (k) “Monopoly” shall refer to a privilege or undue advantage of one or more irms, consisting in the exclusive right to carry on a particular business or trade, and/or manufacture a particular product, article or object of trade, commerce or industry. It is a form of market structure in which one or only a few irms dominate the total sale of a product or service. CHAPTER II PHILIPPINE FAIR COMPETITION COMMISSION SEC. 5. Philippine Fair Competition Commission – To implement the national policy and attain the objectives and purposes of this Act, an independent Commission is hereby created, to be known as the Philippine Fair Competition Commission (PFCC), which shall hereinafter be referred to as the Commission, and shall be organized within one hundred eighty (180) days after the approval of this Act. For budgetary purposes, the Commission shall be under the Of ice of the President. (a) Composition. – The Commission shall be composed of a Chairperson and four (4) Associate Commissioners. The Chairperson and Commissioners shall be citizens and residents of the Philippines, at least forty (40) but not more than sixty-five (65) years of age, of good moral character and of recognized probity and independence. The Chairperson and two (2) of the Associate Commissioners shall be members of the Philippine Bar and the remaining two (2) shall be of recognized competence in the field of economics preferably in industrial organization economics, or finance, commerce accounting or management. They must have actively practiced their professions for at least ten (10) years, but must not have been candidates for any elective national or local office in the immediately preceding elections, whether regular or special.

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(b) Term of Office. – The Chairperson and the Associate Commissioners shall be appointed by the President of the Philippines. The term of office of the Chairperson and the Associate Commissioners shall be six (6) years without reappointment. The Chairperson shall hold office for six years and of the first four (4) Associate Commissioners, two (2) shall hold office for a term of four (4) years and two (2) for a term of two (2) years. In case a vacancy occurs before the expiration of the term of office, the appointment to such vacancy shall be only for the unexpired term of the predecessor; (c) Prohibition and Disquali ications. – The Commissioners shall not, during their tenure, hold any other of ice of employment. They shall not, during their tenure, directly or indirectly practice any profession, participate in any business, or be inancially interested in any contract with, or any franchise, or special privileges granted by the government or any subdivision, agency, or instrumentality thereof, including government-owned and controlled corporations of their subsidiaries. They shall strictly avoid con lict of interest in the conduct of their of ice. They shall not be quali ied to run for any of ice in the election immediately succeeding their cessation from of ice. They shall not be allowed to appear or practice before the Commission for two (2) years following their cessation from of ice. No spouse or relative by consanguinity or af inity within the fourth civil degree and no former law, business, or professional partner or associate of any of the Commissioners, the Chairperson and the Secretary of the Commission may appear as counsel or agent on any matter pending before the Commission or transact business directly or indirectly therein during his/her incumbency and within one (1) year from his/her cessation of of ice. (d) Compensation of Commissioners. – The Chairperson of the Commission shall hold the rank of and shall have the privileges and compensation equivalent to that of a Department Secretary or Presiding Justice of the Court of Appeals, whichever is higher, while the Associate Commissioner shall each hold the rank of and shall have the privileges and compensation equivalent to that of a Department Undersecretary or Associate Justice of the Court of Appeals, whichever is higher. (e) Quorum. – Three (3) members of the Commission shall constitute a quorum and the af irmative vote of three members (3) shall be necessary for the adoption of any rule, ruling, order, resolution, decision or other acts of the Commission en banc. (f) Principal Of ice, Branch and Venue. – The Commission shall hold its principal of ice in Metro Manila but it may conduct hearings outside of Metro Manila upon prior notice for inquiries, studies or any other proceedings required for the proper and ef icient exercise of its power and the discharge of its duties. It may establish branch of ices outside of Metro Manila as may be necessary for the effective discharge of its functions.

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(g) Staff. – The Commission shall appoint an adequate staff which shall be headed by an Executive Director, ix the compensation in accordance with the Revised Compensation and Position Classi ication Law and determine their status, quali ications and duties. The Executive Director shall be appointed by the President and shall have relevant experience in any of the ields of law, economics, commerce, management or inance for at least ten (10) years. Provided, That the Executive Director shall be a Career Executive Service Of icer (CESO). The members of the technical staff, except those performing purely clerical functions, shall process at least a Bachelor’s Degree in the following lines of specialization: economics, preferably in industrial organization; law; inance; commerce; accounting; or management. SEC. 6. Original and Exclusive Jurisdiction, Powers and Functions – Commission shall have original and exclusive jurisdiction to enforce and implement the administrative provisions of this Act, its implementing rules and regulations, and all other competition laws, and in particular; (a) Powers of the Commission Without Hearing. – The Commission shall have the power to do the following acts, without hearing (1) Motu Proprio Investigation or Upon Complaint. – To commence investigation, on its own initiative or upon the complaint of any person, any and all violations of this Act and other competition laws and cause the issuance of a cease and desist order prior to the commencement of a preliminary inquiry, and/or the institution of a civil or administrative action; (2) Administrative Action. – To attest and ile all complaints for appropriate administrative relief from or against violations of this Act or other competitions laws; (3) Civil Action. – To attest and ile, on behalf of the State, civil complaints for damages to business or property of the State, arising from a violation of this Act and other competition laws; (4) Deputization. – To require any government agency to lend assistance and information necessary in the discharge of its responsibilities under this Act, and examine, if necessary, pertinent records and documents in the possession of such government agency; (5) Issuance of Subpoena. – To issue subpoena, subpoena duces tecum and subpoena ad testi icandum in the exercise of its functions, powers and duties under this Act, subject to the following standards: i. No subpoena shall be issued to require the production or disclosure of trade secrets as de ined in paragraph (c) (2) hereof; ii. A subpoena may be quashed only by means of a motion duly set for hearing and on the grounds prescribed by the Rules of Court; iii. A person appearing before the Commission in obedience to a subpoena shall be advised, before he is required to testify or produce any documentary or real evidence, of his right to be assisted or represented by a counsel of his choice, and if

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he has none, the Commission shall appoint a de of icio counsel for him; and of his right to avail of the privilege of immunity from prosecution herein prescribed; (b) Powers of the Commission Upon Prior Notice and Hearing. – The Commission may exercise the following powers, only upon prior notice and hearing: (1) Binding Rules – To issue binding rulings; (2) Showing Cause Order and Decision – To issue show cause orders, and thereafter, render decision thereon; (3) Consent Judgment – To approve, or disapprove, proposals for consent judgment; (4) Preliminary Inquiry – To conduct the required preliminary inquiry of cases involving violations of this Act and other competition laws; and thereafter, if appropriate, to sign and ile the proper criminal complaint before the Department of Justice; and (5) Administrative Fines, Penalties and Sanctions – To impose the appropriate administrative ines or penalties herein authorized to be imposed. (c) Other Powers and Functions of the Commission: (1) Industry Studies and Company Pro ile. – To gather and compile information and investigate from time to time, the way a given industry is structured or organized whether as a monopoly, oligopoly, or competitive; the way the irms within that industry act, behave, or conduct themselves in such matters as setting prices, determining output, and the resulting performance of the industry as a whole; the organization, business, conduct, practices and management of any person, partnership, or corporation engaged in trade, commerce, or industry and its relation to individuals, partnerships, associations, corporations, irms and other business enterprises; (2) Annual and Special Reports. – To require, by general or special orders, irms engaged in trade, commerce, or industry to ile with the Commission in such form as the Commission may prescribe, annual or special reports, or answers in writing to speci ic questions, furnishing the Commission such information as it may require as to the organization, business, conduct, practices, management and relation to other persons of the respective natural or juridical persons or entities iling such reports or answers in writing except that the Commission shall not require, either by a speci ic order or by a subpoena, the disclosure or production of trade secrets such as a secret formula, pattern, device or compilation of information, including names of customers, which is used in one’s business and which gives one an opportunity to obtain advantage over competitors who do not know or use it. Trade secrets shall include a plan or process, tool, mechanism, or compound known only to the owner and his employees to whom it is necessary to con ide it; (3) Public Disclosure of Information. – To make public, from time to time, such portions of the information obtained by it under this Act, except trade secrets and names of customers, as it shall deem expedient in the public interest;

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(4) Reports and Recommendations to Congress. – To submit annual and special reports to Congress, through the Congressional Oversight Committee on Fair Competition created under this Act, including proposed legislation for the regulation of trade, commerce, or industry, and provide for the publication of its reports and resolutions in such form and manner as may be best adopted for public information and transparency; and (5 ) Trade Conditions, Domestic and Foreign. – To study, from time to time, trade conditions in and with foreign countries where associations, combinations, or practices of manufacturers, merchants, or traders, or other conditions, may affect the foreign trade of the Philippines, and report to Congress its indings and recommendations thereon as it may deem advisable. SEC. 7. Jurisdiction of Regional Trial Courts. – The Regional Trial Court shall have jurisdiction over cases arising from violations of the provisions of this Act. With respect to personal actions arising from violations of the provisions of this Act, actions may be commenced and tried where the plaintiff or any of the principal plaintiff resides, or where the defendant or any of the principal defendants reside, or in the case of a non-resident defendant, where he may be found, at the election of the plaintiff. CHAPTER III PROHIBITED ACTS SEC. 8. Anti-competitive Agreements. – It shall be unlawful for firms to engage in horizontal and vertical agreements that prevent, distort or restrict competition, unless otherwise exempted. i. “Horizontal agreement” means an agreement entered into between two or more enterprises operation at the same level in the market;

ii. “Vertical agreement” means an agreement entered into between two or more enterprises, each of which operates, for the purposes of the agreement, at different levels of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell or resell certain goods or services; There shall be a prima facie for the existence of an anti-competitive agreement if and when the Commission finds that two or more firms that are ostensibly competing for the same relevant market and actually perform uniform or complementary acts among themselves which tend to bring about artificial and unreasonable increase, decrease or fixing in the price of any goods or when they simultaneously and unreasonably increase, decrease or fix the prices of their seemingly competing goods thereby lessening competition in the relevant market among themselves.

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(a) Pricing Fixing – Any agreement among competitors to raise, suppress, ix or otherwise maintain the price at which their goods and services are sold such as, but not limited to, establishing or adhering to price discounts, holding prices irmly, eliminating or reducing discounts, adopting a standard or formula for computing prices, maintaining certain prices differentials between different types, sizes or quantities of products, adhering to a minimum fee or schedule and other analogous schemes with the purpose and effect of creating a monopoly or cartel, or lessening competition. (b) Bid Rigging – Any agreement to ix prices at auctions or in any other form of bidding, with the purpose and effect of creating a monopoly or cartel, or lessening competition such as, but not limited to, cover bidding, bid suppression, bid rotation and market allocation and other analogous practices of bid manipulation. In determining whether there is price ixing or bid rigging the following circumstances may be considered: (1) generally, any considered evidence that two sellers of similar goods have agreed to set the price of their goods, to sell only a certain amount of their goods, or to sell a certain amount of their goods, or to sell only to a limited number of buyers or consumers; (2) a drastic change in prices of goods and prices of goods and services involving more than one seller of similar goods of different brands, particularly if the changes in prices take place in equal amount and about the same time; (3) a seller refusing to sell based on an agreement with a competitor; (4) the same firm has repeatedly been the low bidder who has been awarded contracts for a certain service or a particular bidder seems to win bids on a fixedrotation; (5) there is an unusual and unexplainable difference between the winning bid and all other bids; and (6) the same bidder bids substantially higher on some bids than on others, and there is no logical reason to explain the difference SEC. 9. Abuse of Dominant Position. – It shall be unlawful for one or firms to abuse their dominant position, by engaging in unfair methods of competition, or in unfair or deceptive trade practices, or entering into combinations in the form of trust or otherwise, or conspiracy, with the purpose and effect to prevent, restrict, or distort competition. Abusive agreements such as, but not limited to, any of the following, shall be deemed to fail under the crime of abuse of dominant position: (a) Predatory Behavior Towards Competitors – Any agreement, including, but not limited to, selling goods at below relevant cost with the intent of driving competitors out of the market, or creating barriers to entry;

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(b) Limitation and Control of Markets – Any agreement to limit or control production, markets, technical development, or investment with the purpose and effect of creating a monopoly or cartel, or lessening competition; (c) Market Allocation – Any agreement to divide the market, whether by volume of sales or purchase or by territory, by type of goods sold by customers or sellers or by any other means, with the purpose and effect of creating a monopoly or cartel, or lessening competition; (d) Arrangements to Share Markets or Sources of Supply – Any agreement to share markets or sources or supply of raw materials, with the purpose and effect of creating a monopoly or cartel, or lessening competition; (e) Price Discrimination – Any agreement prescribing or charging, directly or indirectly, discriminatory pricing terms or conditions in the supply or purchase of goods of like grade and quality with the purpose and effect of creating a monopoly or cartel, or substantially lessening competition: Provided, That nothing contained herein shall be constructed to prohibit permissible price differentials unless the same shall have the effect of preventing, restricting or distorting competition: Provided, further, That for the purpose of this section the following shall be considered permissible price differentials: (1) Socialized Pricing – Socialized pricing for the less fortunate sector of the economy; (2) Volume Discounts - Price differentials which re lect an allowance for differences in the cost of manufacture, sale, or delivery resulting from differing methods or quantities in which the goods are sold or delivered to the purchasers; (3) Competitive Pricing – A price differential or other terms of sale in response to the competitive price of payments, services or facilities furnished by a competitor; (4) Bona ide Selection of Customers – The selection of customers on bona ide transaction; and (5) Price Differentials Due to Changing Market Conditions or Marketability of Goods - Price change s from time to time in response to changing conditions affecting the market or the marketability of the goods concerned such as, but not limited to, actual or imminent deterioration of perishable goods, obsolescence of seasonal goods, distress sales under court process, or sale on good faith when a business is going to be discounted. (f) Exclusivity Arrangement – Any agreement imposing restrictions on the lease or contract for sale or trade of goods concerning where, to whom, or in what forms goods may be sold or traded, such as, but not limited to ixing prices, or giving preferential discounts, or rebate upon such price, or imposing conditions not to deal with competing irms, where the purpose of such agreement is to lessen competition: Provided,

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That nothing contained herein shall prohibit or render unlawful permissible franchising, licensing or exclusive distributorship agreements; (g) Tie-in Arrangements – Any agreement making the supply of particular goods dependent upon the purchase or lease of other goods from the supplier or his consignee, where the purpose and effect of such sale or lease or such condition is to substantially lessen competition or to create a monopoly or cartel; (h) Boycott – Any concerted to sell or conspiracy not to sell or to stop doing business on the part of the suppliers of any goods, unless for a legitimate purpose. SEC. 10. Anti-competitive Mergers – No firm engaged in commerce or trade shall acquire, directly or indirectly, the whole or any part of the stock or other share capital, or the whole or any part of the assets, of one or more firms engaged in any line of commerce or trade where the effect of such acquisition of such stocks, share capital, or assets, or the use of such stock by voting or granting of proxies or otherwise maybe to substantially lessen competition, or tend to create a monopoly. (a) Permissible Stock or Asset Acquisition or Ownership. – Nothing contained herein, however, shall be construed to prohibit: (1) A firm from purchasing the stock or other share capital of one or more corporations solely for investment and not using the same voting or otherwise to bring about, or in attempting to bring about, the substantial lessening of competition; (2) A corporation from causing the formation of subsidiary corporations, or from owning and holding all or part of the stock of such subsidiary corporations, for the actual carrying on of their immediate lawful business, or the natural and legitimate branches or extensions thereof; and (3) A firm continuing to own and hold the stock or other share capital or assets of another corporation which it acquired prior to the approval of this Act. (b) Notification Prior to Stock or Asset Acquisition. – No firm shall acquire, directly or indirectly, the shares of stock or assets of any other firm, if as a result of the acquisition, the acquiring firm would own twenty percent (20%) or more of the shares of stocks or assets of the acquired firm, unless, the acquiring and selling firm notify, prior to the conclusion of the agreement such acquisition and in the prescribed form, the Commission of such proposed acquisition. Only the acquiring firm is required to make the notification in a tender offer. The contemplated acquisition shall be deemed approved, unless the Commission, within thirty (30) calendar days from receipt of the notification, orders the acquiring firm to show cause why the proposed acquisition shall not be declared as prohibited under this Act. The show cause order shall set forth the facts upon which it is based. The acquiring or selling firm may contest the show cause order, in which case, the proposed acquisition shall be considered enjoined until the Commission shall

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have rendered a decision on the proposed acquisition after due notice and hearing, within further sixty (60) calendar days in accordance with the procedure prescribed herein for the disposition of a show cause order. If the Commission fails to make a decision within the prescribed 60 calendar day limit, the acquisition shall be deemed approved and the parties may proceed to implement it. (c) Transactions Exempt from Prior Notice Requirement. – The following classes of transactions are exempt from the prior notice requirement under this Section: (1) Acquisition of goods or realty transferred in the ordinary course or business; (2) Acquisition of bonds, mortgage, deeds of trust, or other obligations which are not voting securities; (3) Acquisitions of voting securities of an issuer at least ifty percent (50%) of the voting securities of which are owned by the acquiring irm prior to such acquisitions; (4) Transfers to, or from, government agencies or instrumentalities, including government-owned or controlled corporations; (5) Transactions exempted from the provisions of this Act and other proper and applicable laws; (6) Transactions which require the approval of a specialized agency which regulates the particular industry; (7) Acquisitions, solely for the purpose of investment, of voting securities, if as a result of such acquisition the securities acquired or held do not exceed ten percent (10%) of the outstanding voting securities of the issuer; (8) Acquisitions of voting securities pursuant to the preemptive right of the acquiring irm or, if, as a result of such acquisition, the voting securities acquired do not increase, directly or indirectly, the acquiring irm’s per centum share of outstanding voting securities of the issuers; or (9) Such other acquisitions, transfers, or transactions which the Commission may declare as not likely to violate the provisions of this Act or any other proper and applicable law. CHAPTER IV FINES ANDS PENALTIES SEC. 11. Administrative Penalties. (a) Without prejudice to the violation of other laws, any irms shall be found to have violated Sections 8, 9 and of this Act, or any combinations thereof, shall, for each and every violation, be punished by a ine or not less than Ten million pesos (Php10,000,000.00) and not exceeding Fifty million pesos (Php50,000,000.00) if a natural person; by a ine not less than Two hundred ifty million (Php250,000,000.00) but not exceeding Seven hundred ifty million pesos (Php750,000,000.00) if a irm, at the discretion of the Commission.

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In addition, a ine shall be imposed in an amount double the gross proceeds gained by the violator/s or double the gross suffered by the plaintiff. (b) Failure to Comply With An Order of the Commission. – Any person who fails or neglects to comply with any term or condition of a binding ruling, a cease and desist order or an order readjustment issued by the Commission, shall pay a ine of not less than Fifty thousand pesos (Php50,000.00) for each violation. Each violation through a continuing failure or neglect to comply, each day of continuance of such failure or neglect shall be deemed a separate offense. (c) Supply of Incorrect or Misleading Information. – The Commission may likewise impose upon persons or entities ines of not less than Five thousand pesos (Php 5,000.00) to not more than One hundred thousand pesos (Php100,000.00) where, intentionally or negligently, they supply incorrect or misleading information in any document, application or other paper iled with or submitted to the Commission or supply incorrect or misleading information in an application or other paper iled with or submitted to the Commission or supply incorrect or misleading information in an application for a binding ruling, a proposal for a consent judgment, proceedings relating to a show cause order, or application for modi ication of the Commission’s ruling, or order or approval, as the case may be. SEC. 12. Criminal Penalties. – Without prejudice to the violation of other laws, any irm that shall be found to have violated Sections 8, 9, and 10 of this Act, or any combination thereof, shall, for each and every violation, be punished by a ine of not less than Ten million pesos (Php10,000,000.00) and not exceeding Fifty million pesos (Php 50,000,000.00) if a natural person; by a ine of not less than Two hundred ifty million pesos (Php250,000,000.00) but not exceeding Seven hundred ifty million pesos (Php750,000,000.00) if a irm, and by imprisonment not exceeding ten (10) years, or both, at the discretion of the court. In the alternative, a ine shall be imposed in the amount double the gross proceeds gained by the violator or double the gross loss suffered by the plaintiffs. For purposes of determining the persons who will suffer the punishment of imprisonment as provided under the preceding paragraph, provisions of the Revised Penal Code, Title II, Articles 16, 17, 18 and 19 on the criminal liability of principals, accomplices, and accessories shall apply. CHAPTER V ENFORCEMENT SEC. 13. Preliminary Inquiry. – The Commission shall motu proprio, or upon the iling of a veri ied complaint by an interested party or upon referral by the concerned regulatory agency, initiate a preliminary inquiry for the enforcement of this Act. No criminal or civil case for violation of this Act shall be iled or instituted by a private

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party directly in court, unless there has been a preliminary inquiry conducted by the Commission and the same has been endorsed for illing by the Commission. SEC. 14. Powers of Concerned Government Agencies.- Notwithstanding the provisions of the preceding section, the exercise of regulatory powers by different government agencies, including local government units, over an industry or a sub-sector of an industry shall be cumulative and shall not be construed in any way as derogating from the power and authority of the concerned agency. The government agencies shall cooperate and coordinate with one another in the exercise of their powers in order to prevent overlap, to share con idential information, for other effective measures. The Commission can seek technical assistance from sectoral regulators. The Commission shall have primary and sole jurisdiction over competition issues, while the regulatory body shall continue to exercise jurisdiction over all matters with regard to the irms’ operation and existence. SEC. 15. Power to Investigate and Enforce Orders and Resolutions. – The Commission shall conduct preliminary inquiries by administering oaths, issuing subpoena duces tecum and summoning witnesses, and commissioning consultants or experts. It shall determine if any provision of this Act has been violated, enforce its orders and carry out its resolutions by making use of any available means, provisional or otherwise, under existing laws and procedures including the power to punish for contempt and to impose ines. SEC. 16. Self-incrimination.- Pursuant to the preceding section, a person who is the subject of any preliminary inquiry or investigation by the Commission shall produce the speci ied document or information when so required by written notice: Provided, That no person shall be excused from disclosing any document or information to the inquiring of icer on the ground that the disclosure of the information or document may be incriminating: Provided, further, That such document or information produced by the person who is the subject of investigation shall not be admissible as evidence against the person in criminal proceedings: Provided, inally, That such document or information shall be admissible in evidence in civil proceedings including those arising from or in connection to the implement of this Act. SEC. 17. Privileged Communication Exclusion.- Nothing in the preceding section shall compel the disclosure of privileged communication: Provided, That the person who refuses to disclose the information or produce the document or other material required by the inquiring of icer in relation to the preliminary inquiry being conducted shall nevertheless be obliged to give the name and address of the irm to whom, or by whom, or on whose behalf, such privileged communication was made. SEC. 18. Confidentiality of Information.- Any document or information submitted by firms, as determined and marked confidential by the Commission, relevant to any

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investigation being conducted pursuant to this Act shall not, in any manner, be directly or indirectly disclosed, published, transferred, copied, or disseminated. The identity of persons who provide information to the Commission and who need confidentiality to protect themselves against economic retaliation, and any Commission deliberations_in regard to current or still uncompleted matters shall remain confidential. Any violation of this provision shall be imposed a fine of not less than One hundred thousand pesos (Php100,000.00) but not more than Five hundred thousand pesos (Php500,000.00). SEC. 19. Leniency. – Any person or firm which cooperates or furnishes any information, document or data to the Commission before or during the conduct of the preliminary inquiry that constitutes material evidence as determined by the Commission under this Act shall be immune from any suit or charge including from affected parties and third parties: Provided, That the person or firm is not the most guilty. Provided, further, That any person or firm which cooperates or furnishes information, document or data to the Commission in connection to an investigation being conducted shall not be subjected to any form of reprisal or discrimination: Provided, furthermore, That such reprisal or discrimination shall be considered a violation of this Act and subjected to the penalties provided for under Section 11 hereof. Nothing in this section shall preclude prosecution for persons and firms who reported to the Commission with malicious information, data and falsified documents which is damaging to the business and integrity of the persons and firms under inquiry. Such act shall likewise be considered as an unfair trade practice punishable under this Act. SEC. 20. Termination and Action on Preliminary Inquiry. – The Commission, after considering the statements made, or documents or articles produced, in the course of any inquiry conducted by it, shall terminate the preliminary inquiry by issuing a resolution ordering its closure if no violation or infringement of this Act is found; or by issuing a nolo contendere resolution; or issuing a resolution to, singly or cumulatively, (a) impose penalties in the range provided under Section 11 hereof; (b) order the rectification of certain acts or omissions; or (c) order the restitution of the affected parties. When determined by the facts and circumstances, the Commission shall institute a civil action by class suit in the name of the Republic of the Philippines, as parens patriae, on behalf of persons residing in the Philippines, to secure tremble damages for any inquiry sustained by such persons by reason of any violation of this Act, plus the cost of suit and reasonable attorney’s fee. If the evidence so warrants, the Commission shall file criminal cases or violation of this Act or relevant laws before the Deopartment of Justice pursuant to Section 12 of this Act.

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SEC. 21. Nolo Contendere Resolution. – Any firm under inquiry for violation of the provisions of this Act may submit to a nolo contendere resolution at any time before the termination of the preliminary inquiry by: a) the payment of an amount within the range of penalties provided for under Section 11 b) hereof by entering into an undertaking to effectively stop and rectify the acts complained against, make restitution to the affected parties, whether or not the parties are plaintiffs or witnesses; and, c) by submitting regular compliance reports as may be directed: Provided, That ten percent (10%) of the amount paid under this section shall equitably accrue to the Commission: Provided, further, That a nolo contendere resolution shall not bar any inquiry for the same or similar acts if continued or repeated.

SEC. 22. Implementing Policy; Non-Adversarial Administrative Remedies. – As an implementing and enforcement policy, the Commission shall under such rules and regulations it may prescribe, encourage voluntary compliance with this Act and other competition laws by making available to the parties concerned the following and other analogous non-adversarial and non-adjudicatory administrative remedies, before the institution of administrative, civil or criminal action: (a) Request for Binding Ruling. – Any person who is in doubt as to whether the contemplated or existing act, course of conduct, agreement, decision or practice is in compliance with, is exempt from, in violation of any of the provisions of this Act, other competition laws, or implementing rules and regulations thereof, may request the Commission, in writing, to render a binding ruling thereon; (b) Show Cause Order. – Upon preliminary indings mobu proprio or on written complaint under oath by an interested party, that any person is conducting his business, in whole or in part in a manner that may not be in accord with the provisions of this Act or other competition laws, and it inds that the issuance of a show cause order would be in the interest of the public, the Commission shall issue and serve upon such person or persons a written description of its business conduct complained of, a statement of the facts, data, and information together with a summary of the evidence thereof, with an order requiring the said person or persons to show cause, within the period therein ixed, why no order shall issue requiring such person or persons to cease and desist from continuing with ties identi ied business conduct, or pay the administrative ine therein speci ied, or readjust its business conduct or practices; (c) Proposal for Consent Judgment. – At any time prior to the issuance of a binding ruling, the promulgation of a cease and desist judgment under a show cause order or the promulgations of a decision of judgment in any administrative, civil, or criminal case, the person or persons, whose business conduct is under inquiry in the particular proceedings may, without in any manner admitting a violation of this Act or any

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other competition laws, submit to the Commission a written proposal for the entry of a consent judgment, specifying therein the terms and conditions of the proposed consent judgment. (d) Consultations. – Prior to the itting of a request for a binding ruling or the submission of a proposal for consent judgment, the person or persons concerned may communicate, in writing, with the Commission may consider necessary for the effective enforcement of this Act or other competition laws. (e) Binding, Ruling, Cease and Desist Order, and Consent Judgment. – Based upon the facts, data, and information disclosed or supplied by the persons concerned, or established by substantial evidence during the hearing, the Commission shall issue a binding ruling, a cease and desist order or an approval of the proposal for a consent judgment, as the case may be, with or without conditions, to the effect that the particular act, course of conduct, agreement, decision or practice is in accord with this Act or other competition laws, or is exempt there from, or constitutes a violation thereof. If the Commission inds that there is substantial evidence tending to show the act, course of conduct, agreement, decision or practice of the person or persons concerned is prohibited, it shall include in its decision the appropriate order requiring the person or persons concerned to perform certain acts: (1) Cease and Desist Order. – To cease and desist from continuing with the identiied act, course or conduct, agreement, decision, or practice found to be in violation of the provisions of this Act; (2) Administrative Penalty or Fine. – to pay the ine therein ixed; and (3) Readjustment of Business Methods. – To adjust, within a reasonable period therein ixed, its method of doing business, including a corporate reorganization or divestment in the manner and under the terms and conditions prescribed by the Commission, as it may deem proper for the protection of the public interest. (f) Suspension of Administrative, Civil or Criminal Proceedings. – No pending administrative, civil or criminal proceedings or those iled thereafter, against any person, corporation or any other juridical entity or its of icers and employees, shall be suspended, except upon order of the Commission on proper motion, on the ground of the iling of a request for binding ruling, the issuance of a show cause order or the iling of a proposal for a consent judgment based, in whole or in part, on the same set of facts and issues as that of the proceedings sought to be suspended; (g) Monitoring of Compliance. – The Commission shall monitor the compliance by the person or persons concerned, their of icers, and employees, with the inal and executory binding ruling, cease and desist order, or approval of a consent judgment. Upon motion of an interested party, the Commission shall issue a certi ication to the effect that the person or persons concerned have, or have not, as the case may

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be, complied with a inal and executory ruling, order, or approval; (h) Inadmissibly in Evidence. – The request for a binding ruling, the show cause order, or the proposal for consent judgment; the facts, data, and information therein contained or subsequently supplied by the person or persons concerned; admissions, oral or written, made by them against their interest; all other documents iled by them including their evidence presented in the proceedings before the Commission; and the judgment rendered thereon, shall not be admissible as evidence in any administrative, civil or criminal proceedings against such person or persons, their of icers, employees and agents nor constitute a basis for the introduction of the binding ruling, the cease and desist order, or the consent judgment as prima facie evidence against such persons in any such action of proceeding; (i) Modi ication or Reversal of Ruling, Order or Approval. – The Commission may motu proprio or upon petition of an interested party, after notice and hearing, reopen and alter, modify, or set aside, in whole or in part, a binding ruling, a cease-and-desist order, or an approved consent judgment: (1) Whenever conditions of material fact or law have so changed as to require such action; (2) When the concerned person or persons fail or refuse, without justi iable cause therefore, to comply with any condition attached to such ruling order, or approval, including an order to readjust their method of doing business; or (3) When the ruling, order, or approval was based on deliberately falsi ied material fact, data, or information supplied by an interested party bene ited by such ruling, order, or approval. The modi ication or reversal of a binding ruling, a cease and desist order, or an approved consent judgment shall have no retroactive effect and shall not affect or impair any right legally acquired prior to the unjusti ied failure or refusal to comply as speci ied in paragraph (2) hereof, or have deliberately supplied such falsi ied material fact, data or information as speci ied in paragraph (3) above, is barred from claiming any vested right therein. SEC. 23. Standards. – In the exercise of its powers or in the discharge of duties under this act, the Commission shall consider the following: (a) the way a given industry is structured or organized whether monopolistic, oligopolistic, or competitive; (b) the ways the persons engaged in business within a given industry act, behave or conduct themselves in such matters as setting prices, determining output, and other relevant factors and the resulting performance of the industry as a whole; (c) the supply and demand situation for the relevant goods or services;

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(d) the appreciable impact of the particular market conduct on market conditions, if any; (e) the need to bring together complimentary skills to avoid duplication and promote eficiency in the industry; (f) the need to determine whether or not the anticompetitive effect of a particular market conduct may be offset by increased ef iciency and reduction of excessive or unnecessary expenses; (g) the cost and pro it levels of the industry; (h) the need to increase productivity in the particular industry involved; (i) the state of the industry, including the need to develop it or save it from its distressed state; (j) the need of the industry to work more rationally and increase their productivity and competitiveness on a larger market; (k) the need to respond to the international competition and other developments in the international market; (l) the need to encourage or develop small and medium-sized industries; (m) the impact of the market conduct on the economy and on the consuming public, particularly low income groups; (n) the need to pool capital resources; (o) the extent to which the consumers have a possibility of choice of the product or service involved; (p) the economic and inancial power of the parties concerned; (q) the attainment of the objectives which are given priority interest in the general interest of the country, including the need for accelerated industrialization; and (r) the extent to which less restrictive practices are available. SEC. 24. Contempt. – The Commission or any of its Divisions may summarily punish for contempt by imprisonment not exceeding thirty (30) days or by ine, or both, any guilty of such misconduct in the presence of the Commission or any of its Division in its vicinity as to seriously interrupt any hearing, session or any proceedings before it, including cases in which a person willfully fails or refuses, without just cause, to comply with a summon,

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subpoena or subpoena duces tecum legally issued by the Commission or any of its Division, being present at a hearing, proceeding, session or investigation, refused to be sworn as a witness or to answer questions or to furnish information when lawfully required to do so. SEC. 25. Decisions of the Commission. – Decisions of the Commission en banc shall be appealable to the Court of Appeals as hereinafter provided. The appeal shall not stay the order, ruling or decision sought to be reviewed, unless the Court of Appeals shall direct otherwise upon such terms and conditions it may be deem just. SEC. 26. Appeal to the Court of Appeals. – Any party who has actively participated in the proceedings before the Commission and is adversely affected by a binding ruling, order, or resolution, decision, judgment, rule or regulation promulgation after notice and hearing by the Commission sitting en banc, may appeal, by means of a notice of appeal and a veri ied petition for review served upon the Commission and other parties who actively participated in the proceedings, to the Court of Appeals within thirty (30) days from receipt thereof, on the ground that the appealed action of the Commission: (a) is arbitrary to constitutional rights, power, privilege, or immunity; (b) is contrary to constitutional rights, power, privilege, or immunity; (c) is in excess of statutory jurisdiction, authority, or limitations, or is contrary to law; (d) is without observance of the procedure required by law; and (e) is not supported by substantial evidence. The Commission shall be included as a party respondent to the case and shall be represented by its own legal staff. SEC. 27. Appeal to the Supreme Court. – A decision of the Court of Appeals may be appealed to the Supreme Court in the manner and on the grounds prescribed by the Rules of Court. SEC. 28. Reception of Additional Evidence. – Any party in the appellate proceedings may apply for leave to the Court of Appeals or the Supreme Court, to adduce additional evidence before the Commission. The Court may, under such terms and conditions as it may prescribe, order the Commission to receive such additional evidence upon showing that it is material and there are reasonable grounds for the failure to present said evidence in the proceedings before the Commission. The Commission, sitting en banc, may modify its indings as to the facts, or make new indings, by reason of the additional evidence taken, and it shall ile with the appellate court such modi ied or new indings and its recommendations for the af irmation, modi ication, or setting aside of the appealed binding ruling, order, resolution, decision, judgment, rule or regulation. SEC. 29. Writ of Execution. – Upon the inality of its binding ruling, order, resolution, decision, judgment, or rule or regulation, (collectivity, “Decision”), the Commission may issue a writ of execution to enforce its decision and the payment of the administrative ines provided in the preceding sections.

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SEC. 30. Violation by Corporation, Partnership, Association, and Other Entity. – Whenever a corporation, partnership, association, irm or other entity, whether domestic or foreign, shall commit any of the acts declared to be unlawful under this Act, the Chairperson of the Board of Directors, the President, the General Manager of the corporation, the general partners of a partnership, and the of icers and employees directly responsible, shall be jointly and severally liable with the irm for the ine imposed therein. Should the offense be committed by a foreign corporation licensed to do business in the Philippines, the person or persons directly responsible in the Philippines for the management and operation therefore, shall be liable. In addition, its license to do business in the Philippines shall be cancelled. It shall not be a defense for the Chairperson of the Board of Directors, the President or the General Manager of a corporation or the general partners of a partnership, or the persons responsible for the management operation of a foreign corporation licensed to do business in the Philippines, that the person was unaware of the violation, unless, it can be established to the satisfaction of the court that even with the exercise of due diligence and proper supervision, the person could not have avoided or prevented the violation. Any agreement between an of icer, partner or any other of icer and a corporation or partnership whereby the latter directly or indirectly agrees to assume, satisfy or indemnify, in whole or in part, the ine of civil obligation imposed under this Act of such corporate of icer, partner, manager or other of icer found guilty of violating this Act, shall be void. SEC. 31. Alien Violations. – If the person violating any provision of this Act is a foreigner, said person shall, in addition to the other penalties imposed herein, be deported after service of sentence without need of any further proceedings. SEC. 32. Essential Commodities. – If the violations involves the trade or movement of prime commodities such as rice, corn, sugar, chicken, pork, beef, ish, vegetables, and other articles or commodities or prime or basic necessity as declared by the appropriate government agency, through publication, the ine imposed by the Commission or the courts, as the case may be shall automatically be tripled and the offender shall pay such threefold ine. SEC. 33 Private Action. – Regardless of the status or pendency of any proceedings, any irm that suffers injury by reason of any violation of this Act may institute a separate and independent civil action, irrespective of the amount involved in the controversy against the defendants and shall recover treble damages sustained, the costs of suit and reasonable attorney’s fees: Provided, however, That no iling fees shall be collected: Provided, further, That iling fees shall constitute a irst lien in the award of damages. SEC. 34. Effect of Final Judgment. – Any inal judgment in a civil or criminal action brought by the Commission on behalf of the people of the Philippines under this Act to the effect that a defendant has violated any or all of the provisions of this Act shall be res judicata as to any

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claim by any person noti ies the court having jurisdiction of the case brought. Provided, That such person noti ies the court having jurisdiction of the case within the period given by the court: Provided, further, That such period shall not be less than ninety (90) days. It shall be prima facie evidence against such defendant in any civil action brought by any other party under this Act as to all matters respecting which said judgment would be an estoppel as between the parties concerned. SEC. 35. Distribution of Damages Recovered. – The damages recovered in a civil action under Section 20 of this Act shall be distributed in the following manner: (1) as determined and to be authorized by the Court having jurisdiction of the case; (2) ten percent (10%) of the total amount of damages shall accrue to the Commission and/or regulatory agency to be used exclusively in the enforcement of this Act; and (3) the remainder of which total amount of damages shall be deemed a civil penalty by the Court and shall be deposited to the National Treasury as part of the general fund of the government: Provided, That any distribution procedure adopted by the Court shall give preference to individual consumers and afford each interested person a reasonable opportunity to secure his appropriate portion of the net damages obtained. SEC. 36. Measurement of Damages. – Damages may be proved and assessed in the aggregate by statistical or sampling methods, by the computation of illegal overcharges, or by such other reasonable system of estimating aggregate damages as the court in its discretion may permit without the necessity of separately proving the individual claim of, or amount of damage to, persons on whose behalf the suit was brought. SEC. 37. Immunity from Suit. The Commission and the Staff of the Commission shall not be subject to any action, 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 acts and omissions done in evident bad faith or gross negligence. The Commissioner and Staff of the Commission for all costs and expenses reasonably incurred by such persons on connection with any civil or criminal actions, suits or proceedings to which they may be or made a party by reason of the performance of their duties or exercise of their powers, unless they are inally adjudged in such actions or proceedings to be liable for evident bad faith or gross negligence. CHAPTER VI OTHER PROVISIONS SEC. 38. Statute of Limitations. – Any civil or criminal action to enforce any cause of action arising from a violation of any provision of this Act shall be forever barred unless commenced within ive (5) years after the cause of action accrues. The running of the statute of limitation shall be suspended during the pendency of any proceeding.

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The cause of action begins to run when the plaintiff suffers injury to its business or property: Provided, That when the damage suffered by the plaintiff is too speculative to prove, the cause of action does not accrue until the damage becomes probable: Provided, however, That if the plaintiff’s anti-competitive act may restart the limitation period or when a plaintiff reasonably fails to uncover a cause or action that was fraudulently concealed by a defendant. SEC. 39. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and Preliminary Mandatory Injunctions. – Except for the Supreme Court, no other court shall issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the regulatory agency in the exercise of its duties or functions: Provided, That, this prohibition shall apply in all cases, disputes or controversies instituted by a private party, including, but not limited to, cases iled by regulated irms or those claiming to have rights through such irms: Provided, however, That, this prohibition shall not apply when the matter is of extreme urgency involving a constitutional issue, such that the non-issuance of a temporary restraining order will result in grave injustice and irreparable injury to the public: Provided, further, That, the applicant shall ile a bond, in an amount to be ixed by the Court, but in no case shall it be less than half of the imposable ines provided for under Section 11 of this Act: Provided, inally, That in the event that the court inally decides that the applicant was not entitled to the relief applied for, the bond shall accrue in favor of the regulatory agency. Any temporary restraining order, preliminary injunction or preliminary mandatory injunction issued in violation of this section is void and no force and effect. Any judge who violates this section shall be penalized by suspension of at least one (1) year without pay in addition to other criminal, civil or administrative penalties. The Supreme Court may designate regional trial courts to act as commissioners with the sole function of receiving facts of the case of the case involving the acts of the regulatory agency. The designated Regional Trial Court shall, within thirty (30) days from the date of receipt of the referral, forward its indings of facts to the Supreme Court for appropriate action. SEC. 40. Intellectual Property Rights. – The implementation of the provisions of this Act shall be without prejudice to the rights, liabilities and remedies under Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines: Provided, That, the exercise of intellectual property rights shall not in any way be used to justify violations of this Act. SEC. 41. Trade Associations. – Nothing contained in this Act shall be construed to prohibit the existence and operation of trade associations organized to promote quality standards and safety issues: Provided, That, these associations shall not in any way be used to justify any violation of this Act.

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SEC. 42. Congressional Oversight Committee. – To oversee the implementation of this Act, there shall be created a Congressional Oversight Committee of Fair Competition (COCFC) to be composed of the Chairpersons of the Senate Committees on Trade and Commerce, Economic Affairs, and Finance; the Chairpersons of the House Representatives Committees on Trade and Industry, Economics Affairs and Appropriations; and two members each from the Senate and the House of Representatives who shall be designated by the Senate President and the Speaker of the House of Representatives: Provided, That one of the two Senators and one of the two House of Members shall be nominated by the respective Minority Leaders of the Senate and the House of Representatives. The Congressional Oversight Committee shall be chaired by the Chairpersons of the Senate Committee on Trade and Commerce and the House of Representatives Committee on Trade and Industry. The Vice-Chair of the Congressional Oversight Committee shall be jointly held by the Chairpersons of the Senate Committee of Economic Affairs and the House of Representatives Committee on Economics Affairs. The Secretariat of the Congressional Oversight Committee on Fair Competition shall be drawn from the existing personnel of the Senate and House of Representatives committees comprising the Congressional Oversight Committee. CHAPTER VII FINAL PROVISIONS SEC. 43. Implementing Rules and Regulations. – The Commission shall prepare the necessary rules and regulations within one hundred twenty (120) days from the effectivity of this Act: Provided, That, where the same would apply to an industry or a sub-sector of industry that is subject to the jurisdiction of a regulatory agency, the Commission shall, in preparing the guidelines, consult with the concerned regulatory agency and stakeholders: Provided, further, That the Commission may revise such guidelines as it deems necessary: Provided, however, That such revised guidelines only take effect following its publication in two newspapers of general circulation. SEC. 44. Appropriations. – The amount necessary to implement the provisions of this Act shall be included in the annual General Appropriations Act. However, for the initial budgetary requirements of the Commission, the amount of One hundred million pesos (P100,000,000.00) is hereby appropriated: Provided, That all moneys recovered or charges or composition sums collected under this Act, other than inancial penalties, shall be paid into and form part of the moneys of the Commission. SEC. 45. Transitory Provision. – For the purpose of ensuring that the Commission is organized within the mandated period of one hundred eighty (180) days after the approval of this Act, an Inter-Agency Task Force shall be created and composed of the following agencies:

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a) Agencies which will provide administrative support to the Commission: i. Of ice of the President, to be represented by the Executive Secretary with the Deputy Executive Secretary for Legal Affairs as alternate; ii. Department of Budget and Management, to be represented by the Secretary with the Undersecretary in charge of organization of new of ices and position classi ication as alternate; b) Agencies with currently perform functions germane or are related to the purposes of the Commission: i. Tariff Commission, to be represented by the Chairperson and with an Associate Commissioner permanently designated as alternate; ii. Department of Trade and Industry, to be represented by the Secretary with the Director of the Bureau of Trade Regulation and Consumer Protection as alternate representative; iii. Department of Justice, to be represented by the Secretary with an of icer holding at least an Assistant Secretary rank as alternate. The Task Force shall also meet in Executive Session with all the agency heads to deliberate on possible appointees for the position of Chairperson and Associate Commissioners of the Commission for submission to and consideration of the President of the Philippines. The Task Force shall also commence the coordinated advocacy for this Act within ninety (90) days from the effectivity thereof. It shall also implement a broad-based consultation on inputs for the Implementing Rules and Regulations of this Act which must be completed with one hundred twenty (120) days from the effectivity of this Act. The report on the consultations shall be submitted to the Commission within ifteen (15) days from its establishment a copy of which will be furnished to the Congressional Oversight Committee of Fair Competition. SEC. 46. - Suppletory Application. - For purposes of this Act, the Revised Penal Code, as amended, and other applicable laws shall be applied in a suppletory character. SEC. 47. – Separability Clause. – If any clause, sentence, section or part of this Act shall be adjudged by a court of competent jurisdiction to be invalid, such judgment shall not affect, impair or invalidate the remainder of this Act, but shall be con ined in its operation to the clause, sentence, paragraph, section, or part thereof directly involved in the controversy. SEC. 48. Repealing Clause. – The following laws, insofar as they are inconsistent with any of the provisions of this Act, are hereby repealed, amended or otherwise modi ied accordingly:

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(a) Sec. 5 (3) of Republic Act. No. 7581 or The Price Act; (b) Sec. 5 (f) of Republic Act No. 7925 of The Public Telecommunications Policy Act; (c) Sec. 11 (a) and (b) of Republic Act No. 8479 or the Downstream Oil Act; (d) Sec. 45 of Republic Act No. 9136 or The Electric Power Industry Reform Act; (e) Sec. 13 of Republic Act No. 9295 or The Domestic Shipping Development Act; (f) Sec. 24 and 25 of Republic Act No. 9502 or The University-Accessible Cheaper and Quality Medicines Act. Provided, That on case of con lict between this Act and such provisions of existing competition laws and regulations, the provisions of this Act shall prevail. SEC. 49. Effectivity Clause. – This Act shall take effect ifteen (15) days following its publication in the Of icial Gazette and in at least two (2) national newspapers of general circulation: Provided, however, That in order to allow affected parties time to renegotiate agreements or restructure their business to comply with the competition law, the penal provisions under Section 12 of this Act, except for those already prohibited under the Revised Penal Code, shall be imposed one (1) year after the effectivity of the implementing Rules and Regulations of this Act. Approved,

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ANNEXES
FIFTEENTH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES First Regular Session ) ) )

SENATE S. B. No. 1 Introduced by Senator JUAN PONCE ENRILE

EXPLANATORY NOTE Our people have been victims to big business. It behooves the Senate to provide protection to our people against price manipulators. In a volatile economic situation such as that which we are experiencing now, it is not very dif icult to imagine how arti icial prices in one or two commodities is able to directly or indirectly raise the prices of related goods and services. In Article XII, Section 19, our Constitution provides: “Section 19. The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.” As proof of the importance of this Constitutional mandate, Section 22 of the same article encourages the promulgation of legislation that would impose civil and criminal sanctions against those who circumvent or negate this principle. Hence, Section 22 of the Constitution provides: “Section 22. Acts which circumvent or negate any of the provisions of this Article shall be considered inimical to the national interest and subject to criminal and civil sanctions, as may be provided by law.” Although previous legislations have been passed pursuant to this Constitutional mandate, the increased deviousness and complexity of schemes in perpetuating monopolies in the free market landscape necessitates an equally sophisticated legislation that would effectively address this concern.

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Generally, this bill penalizes combinations or conspiracies in restraint of trade and all forms of arti icial machinations that will injure, destroy or prevent free market competition. For these reasons, the passage of this bill is earnestly recommended.

JUAN PONCE ENRILE Senator

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FIFTEENTH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES First Regular Session

) ) ) SENATE S.B.NO: 1

Introduced by Senator Juan Ponce Enrile

AN ACT PENALIZING UNFAIR TRADE AND ANTI-COMPETITIVE PRACTICES IN RESTRAINT OF TRADE, UNFAIR COMPETITION, ABUSE OF DOMINANT POWER, STRENGTHENING THE POWERS OF REGULATORY AUTHORITIES AND APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES Be it enacted by the Senate and the House of Representatives of the Philippines in Congress assembled: CHAPTER 1 TITLE AND DECLARATION OF POLICY SECTION 1. Title. – This Act shall be known and cited as the “Competition Act of 2010.” SEC. 2. Declaration of Policy. - Pursuant to 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) promote and enhance economic ef iciency and free and full competition in trade, industry and all commercial economic activities; (b) prevent the concentration of economic power in a few persons who threaten to control the production, trade, or industry in order to sti le competition, distort, manipulate or constrict the discipline of free markets, increase market prices in the Philippines; and (c) penalize all forms of unfair trade, anti-competitive conduct and combinations in restraint of trade, with the objective of protecting and advancing consumer welfare, CHAPTER 2 SCOPE AND APPLICATION, DEFINITION OF TERMS SEC. 3. Scope and Application. - This Act shall be enforceable within the territory of the Republic of the Philippines and shall apply to all areas of trade, industry and commercial economic activity. It shall likewise be applicable to international trade having direct, substantial and reasonably forseeable 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.

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The Act shall apply to: (a) all irms as de ined hereunder and all their commercial agreements, actions or transactions involving goods, services or intellectual property; and, (b) all natural persons who, acting in their capacity as owner, manager or employee of a irm, shall authorize, engage or aid in the commission of restrictive practices prohibited under this Act. SEC. 4. De inition of Terms. – As used in this Act, the following terms shall be de ined as: (a) Agreements shall refer to any type or form of arrangement, understanding, undertaking or concerted action, whether formal or informal, written or oral; (b) Cartel shall mean a combination of irms, providing goods in relevant markets, acting or joined together to obtain a shared monopoly to control production, sale and price, or to obtain control in any particular industry or commodity, or a group of irms that agree to restrict trade to their mutual bene it, which may or may not be of an international scale. It shall also refer to irms or section of irms having common interest designed to promote the exchange of knowledge resulting from scienti ic and technical research, exchange of patent rights and standardization of products among themselves with the intent of preventing, restricting or distoring competition; (c) Competition shall mean the process by which economic agents, acting independently in a market, limit each other’s ability to control the prevailing conditions in the market; (d) Control shall refer to at least twenty percent (20%) ownership, directly or indirectly, of a irm or a group of irms by another irm; (e) Firms shall include any person, natural or juridical, partnership, combination or association in any form, whether incorporated or not, domestic or foreign, including those owned or controlled by the government, engaged directly or indirectly in any economic activity: Provided, That, two irms, one of which is controlled by the other, shall be treated as one irm: Provided, further, That two or more irms that are controlled by a single irm shall be treated as one irm; (f) Goods shall include all types of goods and services; (g) Market shall refer to a place or venue for commercial activity, which may extend beyond the borders of the Republic of the Philippines, where articles are bought or sold. It shall also refer to the geographical or economic extent of commercial demand; (h) Monopoly shall mean a privilege or undue advantage of one or more irms, consisting in the exclusive right to carry on a particular business or trade, and/or manufacture a particular product, article or object of trade, commerce or industry. It is a form of market structure in which one or only a few irms dominate the total sales of a product or service;

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(i) Monopoly Power or Dominant Position shall refer to a situation where a irm, either by itself or acting in collusion with other irms, is in a position to control a relevant market for the sale of a particular good or service by ixing its prices, excluding competitor irm, or controlling the market in a speci ic geographical area; and (j) Relevant Market shall refer to the line of commerce in which competition has been restrained. It shall also refer to the geographic area involved, including all reasonably substitutable goods, and all nearby competitors, to which consumers could turn if the restraint or abuse results in the signi icant increase in prices. CHAPTER 3 PROHIBITED ACTS SEC. 5. Cartelization. – It shall be unlawful for irms providing goods in relevant markets to join together to monopolize, or to control production in a particular industry or commodity, the sale and price of such good, and to agree to restrict trade for their mutual bene it, which may or may not be on an international scale. This shall also include an association by agreement of irms or sections of irms having common interests designed to promote the interchange of knowledge resulting from scienti ic and technical researches, exchange of patent rights and standardization of products among themselves with the intent of preventing, restricting or distorting competition. Restrictive agreements resulting from cartel-like behavior of irms, in any form, are hereby per se deemed illegal. These shall include, but not limited to, the following: (a) Agreements to ix selling price of goods or other terms of sale; (b) Agreements to limit supply or output; (c) Agreements to divide the market, whether by volume of sales or purchase or by territory, by type of goods sold, by customers or sellers, or by any other means; (d) Agreements to exclude or limit dealings with particular suppliers or sellers from supplying or selling goods, or customers from acquiring or buying goods; (e) Agreements applying dissimilar conditions to equivalent transactions with other parties, thereby placing them at a competitive disadvantage; and (f) Agreements making the transactions in particular goods dependent upon other conditions which have no connection with the subject of the transaction. There shall be a prima facie case for the existence of a cartel if and when the Department of Trade and Industry (DTI) or concerned regulatory agency inds that two or more persons or irms that are ostensibly competing for the same relevant market and actually perform uniform or complementary acts among themselves which tend to bring about arti icial and unreasonable increase, decrease or ixing in the price of any goods or when they simultaneously and unreasonably increase, decrease or ix the prices of their seemingly competing goods thereby lessening competition in the relevant market among themselves.

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SEC. 6. Monopolization. – It shall be unlawful for any irm to willfully or knowingly acquire and maintain its market power by excluding competitors from any part of trade, industry or commerce as distinguished from natural growth or development of a irm as a consequence of a superior product, business acumen or historic accident: Provided, That, a irm that has at least ifty percent (50%) of the relevant market, or irms up to three (3) in number has at least seventy percent (70%) of the relevant market, as found and certi ied by the Department of Trade and Industry or the concerned regulatory agency shall be deemed a monopoly or in a dominant position. SEC. 7. Abuse of Monopoly Power or Dominant Position. – It shall be unlawful for one or more irms with monopoly power or in dominant position within relevant markets to abuse their dominant position, by engaging in unfair methods of competition, or in unfair or deceptive trade practices, or entering into combinations in the form of trust or otherwise, or conspiracy, with the purpose and effect to prevent, restrict, or distort competition. Abusive agreements such as, but not limited to, any of the following, shall be deemed to fall under the crime of abuse of monopoly power or market power by one in dominant position: (a) Predatory Behavior Towards Competitors - Any agreement, including, but not limited to, selling goods at a very low price with the intent of driving competitors out of the market, or creating barriers to entry; (b) Price Fixing - Any agreement among competitors to raise, suppress, ix or otherwise maintain the price at which their goods and services are sold such as, but not limited to, establishing or adhering to price discounts, holding prices irmly, eliminating or reducing discounts, adopting a standard or formula for computing prices, maintaining certain price differentials between different types, sizes or quantities of products, adhering to a minimum fee or schedule and other analogous schemes with the purpose and effect of creating a monopoly or cartel or lessening competition. (c) Bid Rigging - Any agreement to ix price at auctions or in any other form of bidding, with the purpose and effect of creating a monopoly or cartel, or lessening competition such as, but not limited, to cover bidding, bid suppression, bid rotation and market allocation and other analogous practices of bid manipulation. In determining whether there is price ixing or bid rigging, the following circumstances may be considered: (1) generally, any considered evidence that two sellers of similar goods have agreed to set the price of their goods, to sell only a certain amount of their goods, or to sell only to a limited number of buyers or consumers; (2) a drastic change in prices of goods and services involving more than one seller of similar goods of different brands, particularly if the changes in prices take place in equal amount and about the same time; (3) a seller refusing to sell based on an agreement with a competitor;

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(4) the same irm has repeatedly been the low bidder who has been awarded contracts for a certain service or a particular bidder seems to win bids on a ixed-rotation; (5) there is an unusual and unexplainable difference between the winning bid and all other bids; and (6) the same bidder bids substantially higher on some bids than on others, and there is no logical cost reason to explain the difference. (d) Limitation and Control of Markets - Any agreement to limit or control production, markets, technical development, or investment with the purpose and effect of creating a monopoly or cartel, or lessening competition. (e) Market Allocation - Any agreement to divide the market, whether by volume of sales or purchase or by territory, by type of goods sold, by customers or sellers or by any other means, with the purpose and effect of creating a monopoly or cartel, or lessening competition. (f) Arrangements to Share Markets or Sources of Supply - Any agreement to share markets or sources of supply of raw materials, with the purpose and effect of creating a monopoly or cartel, or lessening competition. (g) Price Discrimination - Any agreement prescribing or charging, directly or indirectly, discriminatory pricing terms or conditions in the supply or purchase of goods of like grade and quality with the purpose and effect of creating a monopoly or cartel, or substantially lessening competition: Provided, That nothing contained herein shall be construed to prohibit permissible price differentials unless the same shall have the effect of preventing, restricting or distorting competition: Provided, further, That for the purpose of this section, the following shall be considered permissible price differentials: (1) Socialized Pricing - Socialized pricing for the less fortunate sector of the economy; (2) Volume Discounts - Price differentials which re lect an allowance for differences in the cost of manufacture, sale, or delivery resulting from differing methods or quantities in which the goods are sold or delivered to the purchasers; (3) Competitive Pricing - A price differential or other terms of sale 111 response to the competitive price of payments, services or facilities furnished by a competitor; (4) Bona ide Selection of Customers - The selection of customers on bona ide transaction; and (5) Price Differentials Due to Changing Market Conditions or Marketability of Goods – Price changes from time to time in response to changing conditions affecting the market or the marketability of the goods concerned such as, but not limited to, actual or imminent deterioration of perishable goods, obsolescence of seasonal goods, distress sales under court process, or sale on good faith in discontinuance of business. (h) Exclusivity Arrangement - Any agreement imposing restrictions on the lease or contract for sale or trade of goods concerning where, to whom, or in what forms goods may

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be sold or traded, such as, but not limited to, ixing prices, or giving preferential discounts, or rebate upon such price, or imposing conditions not to deal with competing irms, where the purpose of such agreement is to lessen competition: Provided, That nothing contained herein shall prohibit or render unlawful permissible franchising, licensing or exclusive distributorship agreements. (i) Tie-In Arrangements - Any agreement making the supply of particular goods dependent upon the purchase or lease of other goods from the supplier or his consignee, where the purpose and effect of such sale or lease or such condition is to substantially lessen competition or to create a monopoly or cartel. (j) Boycott - Any concerted refusal to sell or conspiracy not to sell or to stop doing business on the part of the suppliers of any goods, unless for a legitimate purpose, such as, but not limited to: (l) Defaulting Borrowers - refusal by one or more credit institutions to extend loans to defaulting debtors; (2) Defaulting Buyers - refusal by one or more manufacturers or sellers to sell on credit t defaulting customers; and Violators of Intellectual Property Rights - refusal by manufacturers or sellers to have any commercial dealings with one or more irms who violate the intellectual property rights of the owners of patents, copyrights, trademarks and other intellectual property. SEC. 8. Other Unfair Competition Practices. – The following acts shall be unlawful acts of unfair competition and shall be punishable under this Act: (a) Distribution of false or misleading information which is capable of harming the business interests of another irm; (b) Distribution of false or misleading information to consumers, including the distribution of information lacking a reasonable basis related to price, character, method or place of production, properties, suitability for use, or of quality goods; and (c) Unauthorized receipt, use, or dissemination of con idential scienti ic, technical, production, business or trade information. CHAPTER 4 FINES AND PENALTIES SEC. 9. Penalties. – Without prejudice to the violation of other laws, any irm that shall be found to have violated Sections 5, 6, 7 and 8 of this Act, or any combination thereof, shall, for each and every violation, be punished by a ine of not less than Ten million pesos (Php 10,000,000.00) and not exceeding Fifty million pesos (Php50,OOO,OOO.OO) if a natural

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person; by a ine of not less than Two hundred ifty million pesos (Php250,000,000.00) but not exceeding Seven hundred ifty million pesos (Php750,000,000.OO) if a irm, and by imprisonment not exceeding ten (10) years, or both, at the discretion of the court. In the alternative, a ine shall be imposed in the amount double the gross proceeds gained by the violator or double the gross loss suffered by the plaintiffs SEC. 10. Imposition of Fines by Regulatory Agency. – Notwithstanding any provisions of law, regulatory agencies shall, in the conduct of their functions or duties, have the power to impose ines in the amount not less than One hundred thousand pesos (PhplOO,OOO. OO) and not exceeding Five million pesos (Php5,OOO,000.OO), if a natural person; and not less than Five million pesos (Php5,OOO,OOO.00) and not exceeding Fifty million pesos (Php50,000,000.00) if a irm for each violation of or non compliance with an order or notice of the regulatory agency. Ten percent (10%) of such ines shall accrue to the budget of the regulatory agency for the exclusive use in the enforcement of this Act. CHAPTER 5 ENFORCEMENT SEC. 11. Preliminary Inquiry. – The Department of Justice (DOJ), in coordination with the Department of Trade and Industry (DTI), other regulatory and/or appropriate government agency, shall motu propio, upon the iling of a veri ied complaint by an interested party or upon referral by the concerned regulatory agency, initiate a preliminary inquiry for the enforcement of this Act based on reasonable grounds. SEC. 12. Powers of Concerned Regulatory Agencies. – Notwithstanding the provisions of the preceding section, the exercise of regulatory powers by different government agencies over an industry or a sub-sector of an industry shall be cumulative and shall not be construed in any way as derogating from the power and authority of the concerned agency. The government agencies shall cooperate and coordinate with one another in the exercise of their powers in order to prevent overlap, to share con idential information, or for other effective measures. SEC. 13. Power to Investigate and to Enforce Orders and Resolutions. – The DOJ shall conduct preliminary inquiries by administering oaths, issuing subpoena duces tecum and summoning witnesses, and commissioning consultants or experts. It shall determine if any provision of this Act has been violated, enforce its orders and carry out its resolutions by making use of any available means, provisional or otherwise, under existing laws and procedures including the power to punish for contempt and to impose ines. SEC. 14. Self-incrimination. – Pursuant to the preceding section, a person subject of any preliminary inquiry or investigation by the DOJ shall produce the speci ied document or information when so required by written notice: Provided, That no person shall be excused from disclosing any document or information to the inquiring of icer on the ground that

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the disclosure of the information or document may be incriminating: Provided, further, That such document or information produced by the person subject of investigation shall not be admissible as evidence against him in criminal proceedings: Provided, inally, That such document or information shall be admissible in evidence in civil proceedings including those arising from or in connection to the implementation of this Act. SEC. 15. Privileged Communication Exclusion. – Nothing in the preceding section shall compel the disclosure of privileged communication: Provided, That the person who refuses to disclose the information or produce the document or other material required by the inquiring of icer in relation to the preliminary inquiry being conducted shall nevertheless be obliged to give the name and address of the irm to whom, or by whom, or on whose behalf, such privileged communication was made. SEC. 16. Con identiality of Information. – Any document or information submitted by irms, as determined and marked con idential by the DOJ, relevant to any investigation being conducted pursuant to this Act shall not, in any manner, be directly or indirectly disclosed, published, transferred, copied, or disseminated. Any violation of this section shall be imposed the penalty of imprisonment ranging from three (3) to six (6) years and a ine of not less than One hundred thousand pesos (Php100,000.00) but not more than Five hundred thousand pesos (Php500,000.00). SEC. 17. Immunity from Suit. - Any person or irm which cooperates or furnishes any information, document or data to the DOJ before or during the conduct of the preliminary inquiry that constitutes material evidence as determined by the DOJ under this Act shall be immune from any suit or charge including from affected parties and third parties: Provided, further, That any person or irm which cooperates or furnishes information, document or data to the DOJ in connection to an investigation being conducted shall not be subjected to any form of reprisal or discrimination: Provided, furthermore, That such reprisal or discrimination shall be considered a violation of this Act and subjected to the penalties provided for under Section 9: Provided, inally, That, notwithstanding the provisions of Section 21 hereof, the irm which cooperates with the DOJ in its investigation shall be entitled to a reward equivalent to twenty percent (20%) of any monies paid by the irm subject of the inquiry, or the monetary relief recovered from court action. Nothing in this section shall preclude prosecution for persons and irms who reported to the Department of Justice with malicious information, data and falsi ied documents which is damaging to the business and integrity of the persons and irms tmder inquiry. Such act shall likewise be considered as an unfair trade practice punishable under this Act. SEC. 18. Termination and Action on Preliminary Inquiry. – The Department of Justice, after considering the statements made, or documents or articles produced, in the course of an inquiry condncted by it, shall terminate the preliminary inquiry by issuing a resolution

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ordering its closure if no violation or infringement of this Act is found; or by issuing a nolo contendere resolution; or issuing a resolution to, singly or cumulatively, (a) impose penalties in the range provided under Section 9 hereof; (b) order sanctions which may be imposed by the regulatory and/or appropriate government agency; (c) order the rectification of certain acts or omissions; or (d) order the restitution to the affected parties. When determined by the facts and circumstances, the DOJ shall institute a civil action by class suit in the name of the Republic of the Philippines, as parens patriae, on behalf of persons residing in the Philippines, to secure treble damages for any injury sustained by such persons by reason of any violation of this Act, plus the cost of suit and reasonable attorney’s fee. If the evidence so warrants, the DO] shall institute criminal cases for violation of this Act or relevant laws: Provided, That, for criminal prosecution of violations of this Act, no preliminary investigation shall be required, neither shall a petition for review be made: Provided, further. That any appeal shall be instituted to a division of the Court of Appeals exclusively handling competition and consumer protection laws. SEC. 19. Nolo Contendere Resolution. – Any firm under inquiry under the provisions of this Act may submit to a nolo contendere resolution at any time before the termination of the preliminary inquiry by: a) the payment of an amount within the range of penalties provided for under Section 9; b) by entering into an undertaking to effectively stop and rectify the acts complained against, make restitution to the affected parties, whether or not the parties are plaintiffs or witnesses; and, c) by submitting regular compliance reports as may be directed: Provided, That, ten percent (10%) of the amounts paid under this section shall equitably accrue to the DOJ and/or regulatory government agencies involved in the inquiry: Provided, further, That a nolo contendere resolution shall not bar any inquiry for the same or similar acts if continued or repeated. SEC. 20. Private Action. – Regardless of the status or pendency of any proceedings, any firm that suffers injury by reason of any violation of this Act may institute a separate and independent civil action, irrespective of the amount involved in the controversy against the defendant or defendants and shall recover treble damages sustained, the costs of suit and reasonable attorney’s fees: Provided, however, That no filing fees shall be collected: Provided, further, That filing fees shall constitute a first lien in the award of damages. SEC. 21. Effect of Final Judgment. – Any final judgment in a civil or criminal action brought by the DOJ on behalf of the people of the Philippines under this Act to the effect that a defendant has violated any or all of the provisions of this Act shall be res judicata as to any claim by any person on whose behalf such action was brought: Provided, That such person notifies the court having jurisdiction of the case within the period given by the court: Provided, further, That such period shall not be less than ninety (90) days.

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It shall be prima facie evidence against such defendant in any civil action brought by any other party against such defendant under this Act as to all matters respecting which said judgment would be an estoppel as between the parties concerned. SEC. 22. Distribution of Damages Recovered. – The damages recovered in a civil action under Section 19 of this Act shall be distributed in the following manner: (1) as determined and to be authorized by the Court having jurisdiction of the case; (2) ten percent (10%) of the total amount of damages shall accrue to the DOJ andlor regulatory agency to be used exclusively in the enforcement of this Act; and, (3) the remainder of which total amount of damages shall be deemed a civil penalty by the Court and shall be deposited to the National Treasury as part of the general fund of the government: Provided, That any distribution procedure adopted by the Court shall give preference to individual consumers and afford each person having an interest a reasonable opportunity to secure his appropriate portion of the net damages obtained. SEC. 23. Measurement of Damages. – Damages may be proved and assessed in the aggregate by statistical or sampling methods, by the computation of illegal overcharges, or by such other reasonable system of estimating aggregate damages as the court in its discretion may permit without the necessity of separately proving the individual claim, of, or amount of damage to, persons on whose behalf the suit was brought. CHAPTER 6 OTHER PROVISIONS SEC. 24. Statute of Limitations. – Any civil or criminal action to enforce any cause of action arising from a violation of any provision of this Act shall be forever barred unless commenced within ive (5) years after the cause of action accrues. The running of the statute of limitation shall be suspended during the pendency of any proceeding. The cause of action begins to run when the plaintiff suffers injury to its business or property: Provided, That when the damage suffered by the plaintiff is too speculative to prove, the cause of action does not accrue until the damage becomes probable: Provided, however, That if the plaintiffs injury is the result of the continuing violations of this Act, each independent anti-competitive act may restart the limitation period or when a plaintiff reasonably fails to uncover a cause or action that was fraudulently concealed by a defendant. SEC. 25. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and Preliminary Mandatory Injunctions. – Except for the Supreme Court, no other court shall issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the regulatory agency in the exercise of its duties or functions: Provided, That, this prohibition shall apply in all cases, disputes or controversies instituted by a private party, including, but not limited to, cases iled by regulated irms or those claiming to have rights through such irms: Provided, however, That, this prohibition shall not apply

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when the matter is of extreme urgency involving a constitutional issue, such that the nonissuance of a temporary restraining order will result in grave injustice and irreparable injury to the public: Provided, further, That, the applicant shall ile a bond, in an amount to be ixed by the Court, but in no case shall it be less than half of the imposable ines provided for under Section 10 of this Act: Provided, inally, That in the event that the court inally decides that the applicant was not entitled to the relief applied for, the bond shall accrue in favour of the regulatory agency. Any temporary restraining order, preliminary injunction or preliminary mandatory injunction issued in violation of this section is void and of no force and effect. Any judge who violates this section shall be penalized by suspension of at least one (l) year without pay in addition to other criminal, civil or administrative penalties. The Supreme Court may designate regional trial courts to act as commissioners with the solet function of receiving facts of the case involving the acts of the regulatory agency. The designated Regional Trial Court shall, within thirty (30) days from the date of receipt of the referral, forward its indings of facts to the Supreme Court for appropriate action. SEC. 26. Intellectual Property Rights. – The implementation of the provisions of this Act shall be without prejudice to the rights, liabilities and remedies under Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines: Provided, That, the exercise of intellectual property rights shall not in any way be used to justify violations of this Act. SEC. 27. Trade Associations. – Nothing contained in this Act shall be construed to prohibit the existence and operation of trade associations organized to promote quality standards and safety issues: Provided, That, these associations shall not in any way be used to justify any violation of this Act. Sec. 28. Guidelines. – The DOJ, in consultation with the DTI, shall prepare the necessary guidelines for the implementation of this Act: Provided, That, where the guidelines would apply to an industry or a sub-sector of industry that is subject to the jurisdiction of a regulatory agency, the DOJ shall, in preparing the guidelines, consult with the concerned regulatory agency: Provided, further, That the DOJ may revise such guidelines it deems necessary: Provided, however, That such revised guidelines shall only take effect following its publication in two newspapers of general circulation. Sec. 29. Appropriations. – The sum of One hundred million pesos (Php 100,000,000.00) for the initial year of implementation of this Act is hereby appropriated. Thereafter such amounts as may be necessary for the continuous implementation of this Act shall be included in the Annual General Appropriations Act (GAA). Sec. 30. Separability Clause. – If any clause, sentence, section or part of this Act shall be adjudged by a court of competent jurisdiction to be invalid, such judgment shall not affect,

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impair or invalidate the remainder of this Act, but shall be con ined in its operation to the clause, sentence, paragraph, section, or part thereof directly involved in the controversy. SEC. 31. Suppletory Application. - For purposes of this Act, the Revised Penal Code, as amended, and other applicable laws shall be applied in a suppletory character. SEC. 32. Repealing Clause. – All provisions of law, orders, decrees, executive orders, including rules and regulations or parts thereof, which are contrary to or inconsistent with the provisions of this Act are hereby repealed or modi ied accordingly: Provided, however, That all existing competition laws and regulations shall remain in full force and in effect: Provided, further, That in case of con lict between this Act and such provisions of existing competition laws and regulations, the provisions of this Act shall prevail. SEC. 33. Effectivity Clause. – This Act shall take effect ifteen (15) days following its publication in the Of icial Gazette or in at least two (2) national newspapers of general circulation. Approved,

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About CMFR

The formation of the Center for Media Freedom and Responsibility (CMFR) addresses one of the critical concerns confronting the Philippines after People Power toppled the Marcos dictatorship in February 1986. That concern calls attention to the power of media and the role of the free press in the development of Philippine democracy. All over the world, press freedom has been found to be essential to the democratic system. Effective participatory government is possible only when it can count on a well-informed society where individuals freely exchange ideas, where public debate and discussion arise from knowledge and understanding of national affairs. That freedom involves not only media professionals but also the public served by the media—public of icials, the private sector, civil society groups, readers, viewers, and listeners— who receive information and are part of the cycle of public communication. But freedom of the press, like all liberties, has its limits, for the simple reason that it is vulnerable to abuse. Democratic recovery confronts serious obstacles on the media front. The press and the media need to exert special efforts to measure up as a collective vehicle of information, as an instrument for clarifying complex issues and dilemmas of development that the public should understand. Against this background, CMFR was organized in 1989 as a private, non-stock, non-pro it organization involving the different sectors of society. Its programs uphold press freedom, promote public journalism, and ecourage journalistic excellence.

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