PH Competition Act RA 10667 PDF

REVIEWER on the Philippine Competition Act and its Implementing Rules and Regulations
Written by Atty. Abraham Alonzo O. Guiyab
THE PHILIPPINE COMPETITION ACT (R.A. 10667)

Title and Significance Thereof
Q. What is the Full Title of the Law?

A. AN ACT PROVIDING FOR A NATIONAL COMPETITION POLICY PROHIBITING ANTI-
COMPETITIVE AGREEMENTS, ABUSE OF DOMINANT POSITION AND ANTI-COMPETITIVE
MERGERS AND ACQUISITIONS, ESTABLISHING THE PHILIPPINE COMPETITION COMMISSION
AND APPROPRIATING FUNDS THEREFOR
Q. What is the significance of including ‘National Competition Policy’ in the title of the law?
A. It makes explicit the policy recommendatory power of the Philippine Competition Commission.
Q. What is the significance of including ‘Prohibiting Anti-Competitive Agreements, Abuse of Dominant

Position and Anti-Competitive Mergers and Acquisitions’ in the title of the law?
A. It enumerates the three main substantive portions of the law’s categories prohibited acts (Anti-
Competitive Agreements sec.14, Abuses of Dominant Position sec.15, merger which substantially
lessens competition sec.20).
Q. What is the Short Title of the Law?

A. Short Title. – This Act shall be known as the "Philippine Competition Act"
Q. What is meant by Competition Law?

A. Competition law refers to the framework of rules and regulations designed to foster the
competitive environment in a national economy. It consists of measures intended to promote a
more competitive environment as well as enactments designed to prevent a reduction in
competition.
Q. What is meant by Competition Policy?

A. Competition policy broadly refers to all laws, government policies and regulations aimed at
establishing competition and maintaining the same. It includes measures intended to promote,
advance and ensure competitive market conditions by the removal of control, as well as to redress
anti-competitive results of public and private restrictive practice (Tariff Commission Primer on
Competition Law and Policy).
Q. When is National Competition Day?

A. President Aquino issued Proclamation No. 384 (signed on 18 May 2012) declaring December 5 of
every year as “National Competition Day.”
Legal Basis for the enactment Philippine Competition Act
Q. From what law was the Philippine Competition Act derived?

A. US Law, particularly the Sherman Antitrust Act of 1890 (Sherman Act), 15 U.S.C. §§1-7 (2012),
with respect to restraint of trade, and its amendments: the Clayton Act (1914), the Robinson-
Patman-Act (1936), Celler-Kefauver (1950) and the Hart-Scott-Rodino Act (1976). Some elements of
EU law were likewise adopted from the Treaty for the Functioning of the European Union (TFEU),
Article 101 and 102.
Short answer: Sherman Act, as amended.
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Q. What weight does foreign jurisprudence have in our interpretation of the PCA?
A. It is a rational rule of statutory construction that a statute adopted from another state or country
will be presumed to be adopted with the construction placed upon it by the courts of that state or
country before its adoption. Such construction is regarded as of great weight, or at least persuasive,
and will generally be followed if found reasonable, and in harmony with justice and public policy,
and with other laws of the adopting jurisdiction on the subject. (59 C. J. 1065-1068.) Hence, for any
question of construction, resort may be had to the decisions of the Federal Courts in their
interpretation of the U.S. anti-trust law. (Department of Justice Opinion No. 19, series of 1962, Feb
26 1962.)
*AOG – See also PCC Case No. M-2017-001.
Q. What is the Constitutional Basis for the PCA?

A. Article XII, Section 19 of the Constitution. This Section states:
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.
Section 19, Article XII of our Constitution is anti-trust in history and in spirit. It espouses
competition. The desirability of competition is the reason for the prohibition against restraint of
trade, the reason for the interdiction of unfair competition, and the reason for regulation of
unmitigated monopolies. Competition is thus the underlying principle of section 19, Article XII of
our Constitution which cannot be violated by R.A. No. 8180. We subscribe to the observation of
Prof. Gellhorn that the objective of anti-trust law is "to assure a competitive economy, based upon
the belief that through competition producers will strive to satisfy consumer wants at the lowest
price with the sacrifice of the fewest resources. Competition among producers allows consumers to
bid for goods and services, and thus matches their desires with society's opportunity costs." (Tatad
v. Garcia, G.R. No. 124360, (1997)).
*AOG – Prof. Gellhorn is a noted economist from Duke University. The quoted portion is from Anti
Trust Law and Economics in a Nutshell, 1986 ed. p. 45.
Q. Explain the evolution of this provision?

A. Article XII, Section 19 of the Constitution is a restatement with modification of a similar provision
found in the earlier 1973 Constitution, Section 2 of Article XIV: The State shall regulate or prohibit
private monopolies when the public interest so requires. No combinations in restraint of trade or
unfair competition shall be allowed. The key modification being that the term ‘private monopolies’
from the old constitution was changed to simply ‘monopolies’ in general, thereby expanding its
scope to include public monopolies. Thus, it is deemed a codification of the public policy sentiment
against monopolies in general (1973 PHIL.CONST. art. XIV, § 2).
Q. Illustrate the evolution of Competition Laws in the Philippines.

A. Provisions governing competition began with Arts. 543, 544, and 545 of the Spanish Penal Code,
applied to the Philippines in 1887, were the first legal provisions dealing with monopolies and
combinations in restraint of trade. In 1925 Act No. 3247 “An Act to Prohibit Monopolies and
Combinations in Restraint of Trade” was enacted by the Philippine Legislature, adopting the
terminology of the Sherman Act. In 1930, the Revised Penal Code is passed with Article 186
adopting the wording of the previous act as well as the Sherman Act as amended. In 1957, Art. 186
(“Monopolies and Combinations in Restraint of Trade”) of the Revised Penal Code was amended.
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In 1973, the Constitution included a proscription against private monopolies, which in the 1987
Constitution was modified to include public monopolies. In 2011 The Office for Competition, a unit
within the DOJ, was created through EO 45. On July 21, 2015, The Philippine Competition Act (PCA)
was signed into law and took effect on August 8 of the same year. PCC issued Implementing Rules
and Regulations (IRR) on June of 2016, and the two-year transitory period before full criminal and
administrative enforcement ended on August 8 of 2017.
*AOG – If it is asked what was the first competition law in the country, technically it would be the
provisions of the Spanish Penal Code. (US v. Fulgueras, G.R. No. 2176, April 18, 1905) Alternatively,
the first law governing competition explicitly based on the Sherman Act is Act No. 3247. However, if
this question is asked, the provision usually contemplated is article 186 of the RPC.
Q. What are the conditions laid by the Supreme Court for monopolies to be regulated?
A. This constitutional provision does not declare an outright prohibition of monopolies. It simply
allows the State to act "when public interest so requires"; even then, no outright prohibition is
mandated, as the State may choose to regulate rather than to prohibit. Two elements must concur
before a monopoly may be regulated or prohibited:
1. There in fact exists a monopoly or an oligopoly, and
2. Public interest requires its regulation or prohibition.
Whether a monopoly exists is a question of fact. On the other hand, the questions of (1) what public
interest requires and (2) what the State reaction shall be essentially require the exercise of
discretion on the part of the State (Garcia vs. Executive Secretary, G.R. No. 157584, April 2, 2009).
*AOG – The enactment of the PCA fulfills the exercise of discretion requirement provided by this
case. The declaration of policy satisfies the first requirement (determination of what public interest
requires).
Q. What are the other basic market structures (aside from monopoly) wherein degree of competition
affects prices, outputs, and profits?
A: Perfect Competition - an ideal or extreme form of competition. It occurs when a market consists
of many firms selling an identical product to many buyers. Any firm that wishes to do so can enter
or leave the market.
Monopoly - a market with a sole supplier of a good, service or resource for which there is no close
substitute. In addition, there are barriers to entry of new firms.  Natural Monopoly - arises from
natural barriers to entry (such as a unique source of supply) or situation in which one firm can supply
the entire market at a lower price than two or more firms could offer.
Monopolistic Competition - similar to perfect competition, but rather than firms producing identical
products, these are many firms competing against each other by producing similar but slightly
different products.
Oligopoly - is characterized by a small number of firms where quantity sold by any one firm is
influenced by its choice in respect of strategic variables (such as prices, product design, research
and development, advertising, and sales locations) and these choices are strongly influenced by
other firms in the industry
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Public Policy behind the Philippine Competition Act
Q. What is the Declaration of Policy of the PCA?

A: Section 2. Declaration of Policy. – The efficiency of market competition as a mechanism for
allocating goods and services is a generally accepted precept. The State recognizes that past
measures undertaken to liberalize key sectors in the economy need to be reinforced by measures
that safeguard competitive conditions. The State also recognizes that the provision of equal
opportunities to all promotes entrepreneurial spirit, encourages private investments, facilitates
technology development and transfer and enhances resource productivity. Unencumbered market
competition also serves the interest of consumers by allowing them to exercise their right of choice
over goods and services offered in the market.
*AOG – Note that this underlined portion refers to previous laws which deregulated the airline,
telecommunications, downstream oil, and electric power industries, among others.
Q. What is meant by ‘Efficiency’ under Section 2?

A: Generally, this refers to the three forms of efficiency:
Productive efficiency – firms use the least cost production techniques to produce maximum possible
goods and services from given inputs.
Allocative efficiency – resources are channeled to those sectors where they are best utilized in order
to produce goods and services that are valued most highly by consumers.
Dynamic efficiency – firms strive to maintain their competitiveness by investing in research and
development, innovation, marketing and management to keep abreast of the changes in
technology, preferences and products.
Q. What is Market Failure?

A: Market failure occurs when the market is unable to achieve an efficient and equitable allocation
of resources.
Pursuant to the constitutional goals for the national economy to attain a more equitable
distribution of opportunities, income, and wealth; a sustained increase in the amount of goods and
services produced by the nation for the benefit of the people; and an expanding productivity as the
key to raising the quality of life for all, especially the underprivileged and 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
*AOG – Note that this portion actually summarizes and restates the various sections of the
Constitution under National Economy and Patrimony, in particular, it is a word for word
reproduction of Section 1 of Article XII.
Scope of the Philippine Competition Act
Q. What is the Scope of the Philippine Competition Act?

A. Section 3. Scope and Application. — This Act shall be enforceable against any person or entity
engaged in any trade, industry and commerce in the Republic of the Philippines. It shall likewise be
applicable to international trade having direct, substantial, and reasonably 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.
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Q. What is an Entity?
A. “Entity” refers to any person, natural or juridical, sole proprietorship, 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.
Q. What is meant by trade, industry, or commerce?

A. It is synonymous with ‘Economic Activity’ under the definition of ‘Entity’.
Q. Does it apply to non-profit activities?

A. Yes. The term “economic activity” does not only cover activities that generate profits or
dividends for shareholders; it may also include activities conducted on a not for-profit basis. (PCC
Merger Review Guidelines 3.4)
Q. Does it apply to overseas commerce?

A. Yes. It shall likewise be applicable to international trade having direct, substantial, and
reasonably 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.
*AOG – Note that even if it applies to overseas commerce, remedies under the Philippine
Competition Act can coexist with trade remedies imposed by the Department of Trade and Industry
and Tariff Commission under the Anti-Dumping Act of 1999 (e.g. Predatory Pricing and Anti-
Dumping duties can co-exist, despite sharing the element of selling below cost).
Q. Does it apply to government corporations?

A. Yes, it applies to GOCCs. “…. including those owned or controlled by the government, engaged
directly or indirectly in any economic activity”.
*AOG – It does not apply to unincorporated government instrumentalities, nor to government

bodies engaged in governmental, regulatory, or non-proprietary functions (E.G. BIR has a monopoly
on the collection of taxes, but i) It is an unincorporated government instrumentality, ii) it exercises a
fundamental governmental function, Likewise, Philhealth may be a GOCC, and a monopoly in
health insurance, but its function is considered a fundamental one). (See Section 6(b) of AO No. 59)
Sec. 6. Non-Preferential Treatment. — The Government shall observe the following policy
measures and limitations, with respect to government corporations:
(a) The Government shall see to it that government corporations observe judicious restraint
in the exercise of their quasi-judicial, adjudicatory authority or regulatory functions,
especially in areas where they compete with the private sector, to allow the latter to
operate under a regime of less restrictions and to encourage fair competition; except when
the performance of regulatory functions is absolutely necessary in the pursuit of the
national interest and security.
(b) To avoid undue or unfair competition, government corporations operating in a particular

sector or industry shall be subjected to rules and regulations applicable to their private
sector counterparts. (AO 59: Rationalizing The Government Corporate Sector)
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Q. Does it apply to labor and collective bargaining?

A. No. This Act shall not apply to the combinations or activities of workers or employees nor to
agreements or arrangements with their employers when such combinations, activities, agreements,
or arrangements are designed solely to facilitate collective bargaining in respect of conditions of
employment.
*AOG – Labor and collective bargaining is excluded by reason of public policy. However, such
exemption does not apply if the agreements are not solely for purposes of collective bargaining.
Q. Does it apply to Trade Associations?

A. No. Section 48. 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:
*AOG - Exception: Provided, That, these associations shall not in any way be used to justify any
violation of this Act: Provided, however, That it shall not be illegal to use the association as a forum
to discuss or promote quality standards, efficiency, safety, security, productivity, competitiveness
and other matters of common interest involving the industry: Provided, further, That such is done
without any anti-competitive intent or effect.
The Philippine Competition Commission
Q. What is the Philippine Competition Commission?

A. Section 5. Philippine Competition Commission. – To implement the national competition policy
and attain the objectives and purposes of this Act, an independent quasi-judicial body is hereby
created, which shall be known as the Philippine Competition Commission (PCC), hereinafter
referred to as the Commission, and which shall be organized within sixty (60) days after the
effectivity of this Act. Upon establishment of the Commission, Executive Order No. 45 designating
the Department of Justice as the Competition Authority is hereby amended. The Office for
Competition (OFC) under the Office of the Secretary of Justice shall however be retained, with its
powers and functions modified pursuant to Section 13 of this Chapter.
The Commission shall be an attached agency to the Office of the President.
Key Points:
- Quasi-Judicial Body.
- Independent Agency.
- Attached Agency to the Office of the President
- Office for Competition under the Department of Justice created under EO 45 still exists
with power modified. (*AAG – This refers to Section 13. Office for Competition (OFC),
Powers and Functions. The OFC under the Department of Justice (DOJ-OFC) shall only
conduct preliminary investigation and undertake prosecution of all criminal offenses arising
under this Act and other competition-related laws in accordance with Section 31 of Chapter
VI of this Act. The OFC shall be reorganized and allocated resources as may be required
therefor to effectively pursue such mandate.)
Q. What is the composition of the Philippine Competition Commission?

A. Section 6. Composition of the Commission:
Section 6. Composition of the Commission. – The Commission shall be composed of a Chairperson

and four (4) Commissioners. The Chairperson and the Commissioners shall be citizens and residents
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of the Philippines, of good moral character, of recognized probity and independence and must have
distinguished themselves professionally in public, civic or academic service in any of the following
fields: economics, law, finance, commerce or engineering. They must have been in the active
practice of their professions for at least ten (10) years, and must not have been candidates for any
elective national or local office in the immediately preceding elections, whether regular or special:
Provided, That at least one (1) shall be a member of the Philippine Bar with at least ten (10) years of
experience in the active practice of law, and at least one (1) shall be an economist. The Chairperson
and the Commissioners who shall have the rank equivalent of cabinet secretary and undersecretary,
respectively, shall be appointed by the President.
Section 7. Term of Office. – The term of office of the Chairperson and the Commissioners shall be
seven (7) years without reappointment. Of the first set of appointees, the Chairperson shall hold
office for seven (7) years and of the first four (4) Commissioners, two (2) shall hold office for a term
of seven (7) years and two (2) for a term of five (5) years. In case a vacancy occurs before the
expiration of the term of office, the appointment to such vacancy shall only be for the unexpired
term of the predecessor.
The Chairperson and the Commissioners shall enjoy security of tenure and shall not be suspended
or removed from office except for just cause as provided by law.
Key Points
- Chairperson and four (4) Commissioners.
- Fields: economics, law, finance, commerce or engineering.
- At least one (1) shall be a member of the Philippine Bar with at least ten (10) years of
experience in the active practice of law
- At least one (1) shall be an economist
- Term: seven (7) years, fixed term
- Quorum: three (3); required votes: three (3)
Q. What are the powers of the Philippine Competition Commission?

A. Section 12. Powers and Functions. — The Commission shall have original and primary jurisdiction
over the enforcement and implementation of the provisions of this Act, and its implementing rules
and regulations. The Commission shall exercise the following powers and functions:
(a) Conduct inquiry, investigate, and hear and decide on cases involving any violation of this Act and
other existing competition laws motu proprio or upon receipt of a verified complaint from an
interested party or upon referral by the concerned regulatory agency, and institute the appropriate
civil or criminal proceedings;
(b) Review proposed mergers and acquisitions, determine thresholds for notification, determine the
requirements and procedures for notification, and upon exercise of its powers to review, prohibit
mergers and acquisitions that will substantially prevent, restrict, or lessen competition in the
relevant market;
(c) Monitor and undertake consultation with stakeholders and affected agencies for the purpose of
understanding market behavior;
(d) Upon finding, based on substantial evidence, that an entity has entered into an anti-competitive
agreement or has abused its dominant position after due notice and hearing, stop or redress the
same, by applying remedies, such as, but not limited to, issuance of injunctions, requirement of
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divestment, and disgorgement of excess profits under such reasonable parameters that shall be
prescribed by the rules and regulations implementing this Act;
(e) Conduct administrative proceedings, impose sanctions, fines or penalties for any noncompliance
with or breach of this Act and its implementing rules and regulations (IRR) and punish for contempt;
(f) Issue subpoena duces tecum and subpoena ad testificandum to require the production of books,
records, or other documents or data which relate to any matter relevant to the investigation and
personal appearance before the Commission, summon witnesses, administer oaths, and issue
interim orders such as show cause orders and cease and desist orders after due notice and hearing
in accordance with the rules and regulations implementing this Act;
(g) Upon order of the court, undertake inspections of business premises and other offices, land and
vehicles, as used by the entity, where it reasonably suspects that relevant books, tax records, or
other documents which relate to any matter relevant to the investigation are kept, in order to
prevent the removal, concealment, tampering with, or destruction of the books, records, or other
documents;
(h) Issue adjustment or divestiture orders including orders for corporate reorganization or
divestment in the manner and under such terms and conditions as may be prescribed in the rules
and regulations implementing this Act. Adjustment or divestiture orders, which are structural
remedies, should only be imposed:
(1) Where there is no equally effective behavioral remedy; or
(2) Where any equally effective behavioral remedy would be more burdensome for the
enterprise concerned than the structural remedy. Changes to the structure of an enterprise
as it existed before the infringement was committed would only be proportionate to the
substantial risk of a lasting or repeated infringement that derives from the very structure of
the enterprise;
(i) Deputize any and all enforcement agencies of the government or enlist the aid and support of
any private institution, corporation, entity or association, in the implementation of its powers and
functions;
(j) Monitor compliance by the person or entities concerned with the cease and desist order or
consent judgment;
(k) Issue advisory opinions and guidelines on competition matters for the effective enforcement of
this Act and submit annual and special reports to Congress, including proposed legislation for the
regulation of commerce, trade, or industry;
(l) Monitor and analyze the practice of competition in markets that affect the Philippine economy;
implement and oversee measures to promote transparency and accountability; and ensure that
prohibitions and requirements of competition laws are adhered to;
(m) Conduct, publish, and disseminate studies and reports on anti-competitive conduct and
agreements to inform and guide the industry and consumers;
(n) Intervene or participate in administrative and regulatory proceedings requiring consideration of

the provisions of this Act that are initiated by government agencies such as the Securities and
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Exchange Commission, the Energy Regulatory Commission and the National Telecommunications
Commission;
(o) Assist the National Economic and Development Authority, in consultation with relevant
agencies and sectors, in the preparation and formulation of a national competition policy;
(p) Act as the official representative of the Philippine government in international competition
matters;
(q) Promote capacity building and the sharing of best practices with other competition-related
bodies;
(r) Advocate pro-competitive policies of the government by:
(1) Reviewing economic and administrative regulations, motu proprio or upon request, as to
whether or not they adversely affect relevant market competition, and advising the concerned
agencies against such regulations; and
(2) Advising the Executive Branch on the competitive implications of government actions, policies
and programs; and
(s) Charging reasonable fees to defray the administrative cost of the services rendered.
Key Points
(a) Conduct inquiry, investigate, and hear and decide on cases involving any violation of this Act and
other existing competition laws (Sec. 33)
*AOG – This is the investigatory power of the PCC. Note that other existing competition laws
include laws such as EPIRA.
(b) Review proposed M&As, determine notification thresholds, requirements and procedures, and
prohibit M&As that will substantially lessen competition in the relevant market
*AOG – This is the Merger Review of the PCC.
(c) Monitor and undertake consultation with stakeholders and affected agencies
*AOG – This is part of the Policy Review power of the PCC.
(d) Stop or redress anti-competitive conduct by applying Remedies
*AOG – This is part of the enforcement power of the PCC.
(e) Conduct administrative proceedings, impose sanctions, fines or penalties for noncompliance
with the PCA and its IRR (Sec. 33)
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(f) Issue subpoena to require the production of documents relating to any matter relevant to
investigation and personal appearance before the Commission (Sec. 33)
*AOG – This is part the investigatory power of the PCC.
(g) Undertake inspections of business premises and other offices, land, vehicles
*AOG – This is part the investigatory power of the PCC.
(h) Issue adjustment or divestiture orders
(i) Deputize enforcement agencies of the government or enlist the aid of private agencies
(j) Monitor compliance of person or entities concerned with the cease and desist order or consent
judgment
(k) Issue advisory opinions and guidelines on competition Matters
*AOG – This is part of the policy review power of the PCC.
(l) Monitor and analyze the practice of competition in markets affecting the Philippine economy and
implement measures to promote accountability and ensure the PCA is adhered to
(m)Conduct, publish, and disseminate studies and reports on anti-competitive conduct
(n) Intervene or participate in administrative and regulatory proceedings requiring consideration of

the provisions of the PCA
(o) Assist the NEDA in the preparation and formulation of a national competition policy
(p) Act as the official representative of the Philippine government in international competition
matters;
(q) Promote capacity building and the sharing of best practices with other competition-related
bodies
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(r) Advocate pro-competitive policies of the government
(s) Charging reasonable fees to defray the administrative cost of services rendered
*AOG – This is part of the administrative power of the PCC.
Q. Describe the Relationship of the PCC to the Sector Regulators.

A. Section 32. Relationship With Sector Regulators. – The Commission shall have original and
primary jurisdiction in the enforcement and regulation of all competition-related issues.
Where appropriate, the Commission and the sector regulators shall work together to issue rules and
regulations to promote competition, protect consumers, and prevent abuse of market power by
dominant players within their respective sectors.
Q. How do you determine jurisdiction of the PCC?

A. The Commission shall still have jurisdiction if the issue involves both competition and
noncompetition issues, but the concerned sector regulator shall be consulted and afforded
reasonable opportunity to submit its own opinion and recommendation on the matter before the
Commission makes a decision on any case.
Q. Describe the rule with respect to injunctions and TROs against the acts of the PCC?
A. Section 47. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions
and Preliminary Mandatory Injunctions. — Except for the Court of Appeals and the Supreme Court,
no other court shall issue any temporary restraining order, preliminary injunction or preliminary
mandatory injunction against the Commission 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 filed by entities or those claiming to have rights through such
entities: 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 file a bond, in an amount to be fixed by the Court, but in no case shall it exceed
twenty percent (20%) of the imposable fines provided for under Chapter VI, Section 29 of this Act:
Provided, finally, That in the event that the court finally decides that the applicant was not entitled
to the relief applied for, the bond shall accrue in favor of the Commission.
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 (1) year without pay in addition to other criminal,
civil or administrative penalties.
Prohibited Acts – Anticompetitive Agreements
Q. What forms may Anti-Competitive Agreements take?

A. According to the Hilmer Report (1993), the following are the forms of agreements:
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Horizontal Agreements – exist between firms (suppliers or consumers) at the same level of
production chain. This is often referred to as collusion. Collusion usually takes the form of an
agreement on price, such a combination of firms provides them with a degree of pricing power, or in
other words, the ability to at least influence the price of a good.
Vertical Agreements – may vary where firms at different stages of the production chain collude. In
most cases, vertical collusion occurs between suppliers and users of business inputs. This may relate
to price or other matters (i.e. quotas, exclusive dealings, etc.).
Q. What are the prohibited anti-competitive agreements?

A. Section 14. Anti-Competitive Agreements. –
(a) The following agreements, between or among competitors, are per se prohibited:
(1) Restricting competition as to price, or components thereof, or other terms of trade;
(2) Fixing price at an auction or in any form of bidding including cover bidding, bid
suppression, bid rotation and market allocation and other analogous practices of bid
manipulation;
(b) The following agreements, between or among competitors which have the object or
effect of substantially preventing, restricting or lessening competition shall be prohibited:
(1) Setting, Limiting, or controlling production, markets, technical development, or

investment;
(2) Dividing or sharing the market, whether by volume of sales or purchases, territory, type
of goods or services, buyers or sellers or any other means;
(c) Agreements other than those specified in (a) and (b) of this section which have the
object or effect of substantially preventing, restricting or lessening competition shall also be
prohibited: Provided, Those which contribute to improving the production or distribution of
goods and services or to promoting technical or economic progress, while allowing
consumers a fair share of the resulting benefits, may not necessarily be deemed a violation
of this Act.
An entity that controls, is controlled by, or is under common control with another entity or entities,
have common economic interests, and are not otherwise able to decide or act independently of
each other, shall not be considered competitors for purposes of this section.
Q. What are per se prohibited anti-competitive agreements?

A. A Per Se violation is always illegal.
When a violation is labeled as per se, it cannot be justified or excused in any way. The reason for this
is that a Per Se violation is conclusively presumed to have been done with the objective of harming
competition, whereas other violations still allow the introduction of evidence to show these acts in
violation were performed with innocent commercial conduct in mind. A good comparison would be
to say that Per Se violations are punished even at the conspiracy stage, and do not require
consummation.
*AOG – Per se violations are also known as ‘Hardcore’ Violations or ‘Hardcore Cartels’. The word
cartel can refer to either the association, or the anti-competitive agreement. (Department of Justice
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Circular 005 Series of 2015) Note that some cartels are immune to the effects of competition law. A
cartel made of States, such as the Organization of the Petroleum Exporting Countries (OPEC), is
immune to the PCA, despite its extraterritorial effect.
Q. What is special about Sec.14 (a) and (b) violations?

A. These violations are the only ones in the Philippine Competition Act to carry a criminal penalty of
imprisonment. Section 30. Criminal Penalties. – An entity that enters into any anti-competitive
agreement as covered by Chapter III, Section 14(a) and 14(b) under this Act shall, for each and every
violation, be penalized by imprisonment from two (2) to seven (7) years, and a fine of not less than
fifty million pesos (P50,000,000.00) but not more than two hundred fifty million pesos
(P250,000,000.00). The penalty of imprisonment shall be imposed upon the responsible officers,
and directors of the entity.
When the entities involved are juridical persons, the penalty of imprisonment shall be imposed on
its officers, directors, or employees holding managerial positions, who are knowingly and willfully
responsible for such violation.
Q. What is the Single Economic Entity Doctrine?

A. An entity that controls, is controlled by, or is under common control with another entity or
entities, have common economic interests, and are not otherwise able to decide or act
independently of each other, shall not be considered competitors for purposes of this section.
*AOG – This means that if two entities are covered by this doctrine, they cannot commit any of the
violations under Section 14, which requires the entities to be ‘Competitors’.
Q. What steps are followed/factors are looked at in order to determine violations of the PCA?
A. Section 26. Determination of Anti-Competitive Agreement or Conduct. – In determining
whether anti-competitive agreement or conduct has been committed, the Commission shall:
(a) Define the relevant market allegedly affected by the anti-competitive agreement or
conduct, following the principles laid out in Section 24 of this Chapter;
(b) Determine if there is actual or potential adverse impact on competition in the relevant
market caused by the alleged agreement or conduct, and if such impact is substantial and
outweighs the actual or potential efficiency gains that result from the agreement or
conduct;
(c) Adopt a broad and forward-looking perspective, recognizing future market

developments, any overriding need to make the goods or services available to consumers,
the requirements of large investments in infrastructure, the requirements of law, and the
need of our economy to respond to international competition, but also taking account of
past behavior of the parties involved and prevailing market conditions;
(d) Balance the need to ensure that competition is not prevented or substantially restricted
and the risk that competition efficiency, productivity, innovation, or development of priority
areas or industries in the general interest of the country may be deterred by overzealous or
undue intervention; and
(e) Assess the totality of evidence on whether it is more likely than not that the entity has
engaged in anti-competitive agreement or conduct including whether the entity’s conduct
was done with a reasonable commercial purpose such as but not limited to phasing out of a
13
product or closure of a business, or as a reasonable commercial response to the market

entry or conduct of a competitor.
Q. What is the Relevant Market?

A. (k) Relevant market refers to the market in which a particular good or service is sold and which is
a combination of the relevant product market and the relevant geographic market, defined as
follows:
(1) A relevant product market comprises all those goods and/or services which are regarded
as interchangeable or substitutable by the consumer or the customer, by reason of the
goods and/or services’ characteristics, their prices and their intended use; and
(2) The relevant geographic market comprises the area in which the entity concerned is
involved in the supply and demand of goods and services, in which the conditions of
competition are sufficiently homogenous and which can be distinguished from neighboring
areas because the conditions of competition are different in those areas.
Q. What is the Market?

A. Market refers to the group of goods or services that are sufficiently interchangeable or
substitutable and the object of competition, and the geographic area where said goods or services
are offered.
*AOG – The relevant market is the one considered for purposes of determining: i) Whether or not
an Entity is dominant, and ii) whether or not there will be a substantial lessening of competition.
The act of determining the relevant market is known as ‘Market Definition’.
Q. What are the per se prohibited anti-competitive agreements in the PCA?

A. Under the current state of the law, there are only two ‘per se’ violations of the Philippine
Competition Act: Price-fixing (Philippine Competition Act §14 (a) (1) and bid-rigging (Philippine
Competition Act §14 (a) (2).
Price Fixing (Philippine Competition Act §14 (a) (1)
*AOG – Note that ‘Price-fixing’ is being used here as an umbrella term for all §14 (a) (1) offenses. In
point of fact, not all such offenses need to pertain to price; it is sufficient if it refers to components
thereof, or other terms of trade.
Q. What is the standard of proof required to prove anti-competitive agreements in the PCA?
A. Standard of proof: Substantial Evidence “that amount of relevant evidence that a reasonable
mind might accept as adequate to support a conclusion”
Q. What is Price Fixing?
A. Price Fixing as a violation is punished by Section 14 (a) (1) of the Philippine Competition Act, as
follows:
Sec. 14. Anti-Competitive Agreements. –

(1) Restricting competition as to price, or components thereof, or other terms of trade;
(2) Fixing price at an auction or in any form of bidding including cover bidding, bid suppression, bid
rotation and market allocation and other analogous practices of bid manipulation;
Q. What is an agreement for purposes of Price Fixing?
14
A. To understand Price Fixing, we must first understand how the competition law defines an
‘agreement.’ The Definition of Terms of the Competition Law state that an agreement is:
(b) Agreement refers to any type or form of contract, arrangement, understanding, collective
recommendation, or concerted action, whether formal or informal, explicit or tacit, written or oral.
*AOG – Agreement includes Gentleman’s Agreement, and other agreement which are not legally
binding, including signaling.
Q. What are the elements of Price Fixing?

A.
1) There are two or more entities in the same horizontal market.
2) Basic element: An “agreement” is reached, whether overt or tacit, which implies
two or more businesses must be involved in restraint.
3) Intent to ‘fix’ prices by restricting competition as to price.
Example - Example of price fixing

After several months of competing against each other, Company A and Company B, the only sellers
of soda drinks in Quezon City, agreed to set the price of their products to PhP 100.00 per bottle.
(Examples provided by PCC).
Q. What is Bid Rigging?

A. Bid Rigging as a violation is punished by Section 14 (a) (2) of the Philippine Competition Act, as
follows:
Sec. 14. Anti-Competitive Agreements. –

XXX
(2) Fixing price at an auction or in any form of bidding including cover bidding, bid
suppression, bid rotation and market allocation and other analogous practices of bid
manipulation;
Q. What are the forms of Bid Rigging?

A. The following are non-exclusive examples of bid rigging:
i. cover bidding,
ii. bid suppression,
iii. bid rotation,
iv. Market allocation.
v. Analogous practices of bid manipulation.
Q. What is cover bidding?

A. Simulated bidding (also known as "cover" or "courtesy" bidding) occurs when some competitors
agree to submit bids that either are too high to be accepted or contain special terms that will not be
acceptable to the buyer. Such bids are not intended to secure the buyer's acceptance, but are
merely designed to give the appearance of genuine competitive bidding.
Q. What is bid suppression?

A. In bid suppression schemes, one or more competitors who otherwise would be expected to bid,
or who have previously bid, agree to refrain from bidding or withdraw a previously submitted bid so
that the designated winning competitor's bid will be accepted.
Q. What is bid rotation?
15
A. In bid rotation schemes, all conspirators submit bids but take turns being the low bidder. The
terms of the rotation may vary; for example, competitors may take turns on contracts according to
the size of the contract, allocating equal amounts to each conspirator or allocating volumes that
correspond to the size of each conspirator company. A strict bid rotation pattern defies the law of
chance and suggests collusion is taking place.
Q. What is Market allocation?

A. Market division or allocation schemes are agreements in which competitors divide markets
among themselves. In such schemes, competing firms allocate specific customers or types of
customers, products, or territories among themselves. For example, one competitor will be allowed
to sell to, or bid on contracts let by, certain customers or types of customers. In return, he or she will
not sell to, or bid on contracts let by, customers allocated to the other competitors. In other
schemes, competitors agree to sell only to customers in certain geographic areas and refuse to sell
to, or quote intentionally high prices to, customers in geographic areas allocated to conspirator
companies.
*AOG – Definitions of forms of Bid Rigging provided by US Department of Justice Antitrust

Division.
Example - Instead of selling soda in both Makati and Quezon City, Company A and Company B
agreed to divide territories between themselves and cease production in the other area in order to
charge higher prices.
Q. What are Sec. 14 (c) violations?

A. Section 14 © is intended as a catch-all clause, to allow the PCC to investigate all violations no
matter their manner of performance (for reference, see definition of ‘agreement’): (c) Agreements
other than those specified in (a) and (b) of this section which have the object or effect of
substantially preventing, restricting or lessening competition shall also be prohibited: Provided,
Those which contribute to improving the production or distribution of goods and services or to
promoting technical or economic progress, while allowing consumers a fair share of the resulting
benefits, may not necessarily be deemed a violation of this Act.
Q. Is Section 14© a per se violation?

A. No. It allows for a justification in its proviso; Provided, Those which contribute to improving the
production or distribution of goods and services or to promoting technical or economic progress,
while allowing consumers a fair share of the resulting benefits, may not necessarily be deemed a
violation of this Act.
Prohibited Acts – Abuses of Dominant Position
Q. What are the categories of abuse of dominant position?

A. These are Exclusive, Exploitative, and Discriminatory abuse.
Q. What is meant by Exclusionary Abuse?

A. Exclusionary abuses comprise all practices that a dominant undertaking may use to obstruct
others, restrict their options, establish entry barriers and therefore remove or weaken the potential
competition
Q. What is meant by Exploitative Abuse?

A. Exploitative abuse consists in directly or indirectly imposing unfair purchase or selling prices or
other unfair trading conditions. It is an abusive conduct which exploits customers or suppliers
16
Q. What is meant by Discriminatory Abuse?

A. Price discrimination is the major discriminatory abusive conduct. As a means of discriminatory
abuse, different consumers are charged different prices for the same product. In other saying, in
price discrimination different, prices are collected from the same product or the same price is
collected from different products. (Guidance on the Commission’s enforcement priorities in applying
Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, 2009/C 45/02,
para. 47,)
Q. What is a Rule of Reason violation under the PCA?

A. A Rule of Reason violation is NOT always illegal.
When a violation is labeled as Rule of Reason, it cannot be said to be immediately illegal. The reason
for this is that such conduct may possess reasonable commercial justifications, or otherwise benefit
consumers. In such cases, the competition commission must establish the pro or anticompetitive
effects first, usually supported by evidence adduced by the supposed violator and affected parties.
*AOG – The term ‘Rule of Reason’ is of US origin.
Q. What is the Object or Effect test?

A. the object or effect of substantially preventing, restricting or lessening competition shall also be
prohibited: XXX
*AOG – Generally, object here refers to the ‘intent’ of the entity, whereas ‘effect’ refers to the
actual substantial lessening of competition. Thus, as worded, either criteria would satisfy the
requirement to make an act an abuse of dominance. The term ‘Object and Effect’ itself is of EU
origin.
Q. What are the Rule of Reason violations under the PCA?

A. The rule of reason violations under the PCA are Sec. 14 ©, because of its justification proviso, and
the acts of abuse of dominance under Section 15, likewise because each violation allows
presentation of justifying evidence.
Q. What is Dominance under the PCA?

A. “Dominant position refers to a position of economic strength that an entity or entities hold which
makes it capable of controlling the relevant market independently from any or a combination of the
following: competitors, customers, suppliers, or consumers,” [Section 4(g)]
Q. How is market dominance determined under the PCA?

A. In determining whether an entity has market dominant position for purposes of this Act, the
Commission shall consider the following:
(a) The share of the entity in the relevant market and whether it is able to fix prices
unilaterally or to restrict supply in the relevant market;
(b) The existence of barriers to entry and the elements which could foreseeably alter both
said barriers and the supply from competitors;
(c) The existence and power of its competitors;
(d) The possibility of access by its competitors or other entities to its sources of inputs;
(e) The power of its customers to switch to other goods or services;
17
(f) Its recent conducts; and
(g) Other criteria established by the regulations of this Act.
Q. What is the rebuttal presumption of dominance?

A. There shall be a rebuttable presumption of market dominant position if the market share of an
entity in the relevant market is at least fifty percent (50%), unless a new market share threshold is
determined by the Commission for that particular sector.
The Commission shall from time to time determine and publish the threshold for dominant position
or minimum level of share in the relevant market that could give rise to a presumption of dominant
position. In such determination, the Commission would consider the structure of the relevant
market, degree of integration, access to end-users, technology and financial resources, and other
factors affecting the control of a market, as provided in subsections (a) to (g) of this section
Q. What factors are not considered as violative of this act?

A. The Commission shall not consider the acquiring, maintaining and increasing of market share
through legitimate means not substantially preventing, restricting, or lessening competition in the
market such as but not limited to having superior skills, rendering superior service, producing or
distributing quality products, having business acumen, and the enjoyment and use of protected
intellectual property rights as violative of this Act.
Q. Distinguish Single from Collective Dominance.

A. “Dominance can exist on the part of one entity (single dominance) or of two or more entities
(collective dominance).” (IRR Rule 8, Section 1)
Q. What is the Essential Facilities Doctrine?

A. Within the framework of competition policy, an essential facility is a major infrastructure which
exhibits two characteristics:
i. The facility is essential to the effective operation of an economic organization;
ii. The facility exhibits natural monopoly characteristics. Ex: electricity grids, rail
infrastructure, roads, port facilities, pipelines and telecom network.
Q. What is a Natural Monopoly?

A. The distinguishing feature of a natural monopoly is that a single facility can supply the entire
market demand more efficiently than two or more smaller facilities.
Typically, natural monopolies have the following features: (1) large development and start-up costs;
and (2) economies of scale, i.e., as output is increased, the average cost per unit output declines.
Natural monopoly is an outcome of the size of the market and the type of technology available to
meet demand. It is not a market structure, rather a cost-minimizing method of production.
AOG – Note that both the essential facilities doctrine and natural monopoly principle are not
necessarily ‘defenses’ under the competition law, rather, industries which exhibit these
characteristics are subject to special scrutiny because the nature of their operations may simulate
effects of abuse of dominance.
Q. What are the Abuses of Dominant Position under the PCA?
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A. SEC. 15. Abuse of Dominant Position. – It shall be prohibited for one or more entities to abuse
their dominant position by engaging in conduct that would substantially prevent, restrict or lessen
competition:
AOG – Note, all these violations require the entity to be ‘dominant’. However, not all PCA violations
require dominance. Section 14 violations do not require dominance. A good observation here is that
Section 14 violations require at least two competitors, while Section 15 may be violated by a single
dominant entity or a group of entities exercising collective dominance.
(a) Selling goods or services below cost with the object of driving competition out of the relevant
market: Provided, That in the Commission’s evaluation of this fact, it shall consider whether the
entity or entities have no such object and the price established was in good faith to meet or
compete with the lower price of a competitor in the same market selling the same or comparable
product or service of like quality;
AOG – Also known as “Selling below cost”.
(b) Imposing barriers to entry or committing acts that prevent competitors from growing within the
market in an anti-competitive manner except those that develop in the market as a result of or
arising from a superior product or process, business acumen, or legal rights or laws;
AOG – Also known as “Imposing barriers to entry or competition growth hindrance”.
Example of barriers to entry

Company A is the dominant soda producer in Quezon City and has long term exclusive supply
contracts with distributors.
Company B intends to enter the soda market in QC, but could not get contracts with distributors.
Company B eventually exits the market as it could not compete with Company A.
(c) Making a transaction subject to acceptance by the other parties of other obligations which, by
their nature or according to commercial usage, have no connection with the transaction;
AOG – Also known as “Subjecting commercial transactions to conditions unrelated to a commercial

purpose”.
(d) Setting prices or other terms or conditions that discriminate unreasonably between customers
or sellers of the same goods or services, where such customers or sellers are contemporaneously
trading on similar terms and conditions, where the effect may be to lessen competition
substantially:
Provided, that the following shall be considered permissible price differentials:
(1) Socialized pricing for the less fortunate sector of the economy;
(2) Price differential which reasonably or approximately reflect differences in the cost of
manufacture, sale, or delivery resulting from differing methods, technical conditions, or
quantities in which the goods or services are sold or delivered to the buyers or sellers;
(3) Price differential or terms of sale offered in response to the competitive price of
payments, services or changes in the facilities furnished by a competitor; and
(4) Price changes in response to changing market conditions, marketability of goods or
services, or volume;
AOG – Also known as “Price and/or market discrimination”.
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(e) Imposing restrictions on the lease or contract for sale or trade of goods or services concerning
where, to whom, or in what forms goods or services may be sold or traded, such as fixing prices,
giving preferential discounts or rebate upon such price, or imposing conditions not to deal with
competing entities, where the object or effect of the restrictions is to prevent, restrict or lessen
competition substantially: Provided, That nothing contained in this Act shall prohibit or render
unlawful:
(1) Permissible franchising, licensing, exclusive merchandising or exclusive distributorship

agreements such as those which give each party the right to unilaterally terminate the
agreement; or
(2) Agreements protecting intellectual property rights, confidential information, or trade
secrets;
AOG – Also known as “Exclusivity arrangements”.
(f) Making supply of particular goods or services dependent upon the purchase of other goods or
services from the supplier which have no direct connection with the main goods or services to be
supplied;
AOG – Also known as “Bundling”.
(g) Directly or indirectly imposing unfairly low purchase prices for the goods or services of, among
others, marginalized agricultural producers, fisherfolk, micro-, small-, medium-scale enterprises,
and other marginalized service providers and producers;
AOG – Also known as “Predatory purchase pricing”. Note that the enumeration is not exclusive, but
under the principle of ejusdem generis, this form of abuse of dominance must be committed against
a group experiencing some form of disadvantage or marginalization.
(h) Directly or indirectly imposing unfair purchase or selling price on their competitors, customers,
suppliers or consumers, provided that prices that develop in the market as a result of or due to a
superior product or process, business acumen or legal rights or laws shall not be considered unfair
prices; and
AOG – Also known as “Predatory selling pricing”. Note that the offended party need not be a
marginalized entity or sector.
Example - Company A is a dominant soda producer in Quezon City. Company B is a new player in
the market Company A prices sodas below cost and incurs losses for a significant period to force
Company
B out of the market Unable to compete, Company B stops operations and exits the market.
Company A raises price of sodas afterwards
Q.What is the Areeda-Turner test?

A. It is a test used to determine the presence of Predatory Pricing using average variable cost. The
definition in the bill at hand which was taken from the Areeda-Turner test in the United States on
predatory pricing resolves the questions." Following the more effective Areeda-Turner test,
Congressman Tinga has proposed to redefine predatory pricing, viz.: "Predatory pricing means
selling or offering to sell any oil product at a price below the average variable cost for the purpose of
20
destroying competition, eliminating a competitor or discouraging a competitor from entering the

market." (Tatad vs. Secretary of Energy)
(i) Limiting production, markets or technical development to the prejudice of consumers, provided
that limitations that develop in the market as a result of or due to a superior product or process,
business acumen or legal rights or laws shall not be a violation of this Act:
AOG – Also known as “Output restriction”.
Q. What is “Selling below cost”?

A. Selling below cost is the practice of systematically or medium enterprises by absorbing
temporary losses through selling products at a loss, with the intent of enticing customers to
purchase the product sold below cost. The intent behind the act is to prevent other competitors
from being able to grow or turn a profit because the other entities have a lesser capacity to absorb
losses.
This act is not per se illegal, rather what makes the act illegal is the intent behind it, which is the
object of driving competition out of the relevant market.
Q. What is “Imposing barriers to entry or competition growth hindrance”?

A. This is a catch-all provision designed to cover all schemes or agreements which have the
particular objective of preventing new industries from being able to enter the industry. What makes
the act illegal is not the incidental effect of an agreement which may decrease competition, rather
the agreement must have been designed with the end in mind of preventing competition in the
future from arising either from the entry of new players or increase in capacity of new players.
Q. What is “Subjecting commercial transactions to conditions unrelated to a commercial purpose”?

A. This is essentially an act by which an entity increases its dominance in multiple markets by
attaching a condition which does not serve a purpose in the main transaction, with the objective of
achieving an anti-competitive objective in another market. By this method, a violator can take
advantage of its strength in one product or market to influence others.
Q. What is “Price and/or market discrimination”?

A. Price discrimination is the practice of charging different markets a different price for the same-
product. The key element here is the identity of the product, and the unjustified differentiation of
prices between different markets. This means that the difference is price is for reasons not
associated with costs of supply.
Q. What is “Exclusivity arrangements”?

A. These are agreements whereby one of the parties to the transaction gains the exclusive right to
transact with a given market, excluding other players from participating by virtue of contractual
rights rather than by anti-competitive agreement.
Q. Distinguish between Primary and Secondary Boycott.

A. Primary boycotts or exclusionary provisions occur when a group of people or firms agree not to
deal with a particular supplier or customer. This is subject to per se prohibition.
Secondary boycotts occur when a group of people who may not otherwise deal with the target
organization persuade another uninvolved (supplier) not to deal with the target organization.
Q. What is “Bundling”?
21
A. Bundling is the practice of including a product or service with the purchase of another product or
services. This can be either in the form of freely including the second product, or making the sale of
the first product dependent on likewise purchasing the second product. Usually this practice occurs
when the primary product is dominant, and the bundled product is not. The aim of this type of act is
to lock-in customers into using the bundled good.
Q. What is “Predatory purchase pricing”?

A. This is the act of a dominant player purchasing goods from other entities at exceptionally low
prices, by reason of their dominance. What constitutes an unfairly low price will differ from a case-
to-case basis.
Q. What is “Predatory selling pricing”?

A. This is the act of a dominant player selling goods at unfair prices. What constitutes an unfair price
is one which has not been developed by the market itself, but rather has been achieved by the anti-
competitive acts of the seller. In predatory selling price, the price may be lower or higher than what
the market would justify. In either case, the pricing is unfair.
*AOG – The standard test for predatory pricing in this jurisdiction is the Areeda-Turner test.
Predatory pricing means selling or offering to sell any product at a price below the average variable
cost for the purpose of destroying competition, eliminating a competitor or discouraging a
competitor from entering the market. (Tatad v. Garcia, 1997).
Q. What is “Output restriction”?

A. This is the act of a seller lowering output of products or services, for the purpose of driving up the
costs of such goods or products at a given time.
Example - Company A and Company B can each produce 100 bottles of soda in their respective
factories and sell all produced output to soda drinkers in Quezon City. The price of each bottle is
PhP 80.00. To create artificial scarcity of soda in QC for April and May, Company A and Company B
agreed to sell only half of their output to the market and keep the other half in their respective
warehouses to increase prices.
Q. Summarize the defenses for abuse of dominance.

A. See below.
ACT EXEMPTION
Selling below cost The price established was in good faith to
meet or compete with the lower price of a
competitor in the same market selling the
same or comparable product or service of
like quality.1
Imposing barriers to entry or competition growth The barriers to entry developed in the
hindrance market as a result of or arising from a
superior product or process, business
acumen, or legal rights or laws.2
Subjecting commercial transactions to Must substantially prevent, restrict or
conditions unrelated to a commercial purpose lessen competition.3
1 Id. §15 (a).

2 Id. §15 (b).
3 Philippine Competition Act, §15.
22
Price and/or market discrimination Socialized pricing for the less fortunate
sector of the economy; price differential
which reasonably or approximately reflect
differences in the cost of manufacture,
sale, or delivery resulting from differing
methods, technical conditions, or
quantities in which the goods or services
are sold or delivered to the buyers or
sellers; price differential or terms of sale
offered in response to the competitive
price of payments, services or changes in
the facilities furnished by a competitor; and
price changes in response to changing
market conditions, marketability of goods
or services, or volume.4
Exclusivity arrangements Permissible franchising, licensing, exclusive
merchandising or exclusive distributorship
agreements such as those which give each
party the right to unilaterally terminate the
agreement; or
Agreements protecting intellectual
property rights, confidential information,
or trade secrets. 5
Bundling If the goods have a direct connection with
the main goods or services to be supplied.6
Predatory purchase pricing Prices must be unfairly low.7
Predatory selling pricing Prices that develop in the market as a
result of or due to a superior product or
process, business acumen or legal rights or
laws shall not be considered unfair prices.8
Output restriction Limitations that develop in the market as a
result of or due to a superior product or
process, business acumen or legal rights or
laws shall not be a violation.9
Merger Control Regime
Q. What is the basis for the PCC’s Merger Control power?

A. Section 16. Review of Mergers and Acquisitions. — The Commission shall have the power to
review mergers and acquisitions based on factors deemed relevant by the Commission.
Q. Distinguish between Mergers under the PCA and under the Corporation Code.
A. Distinction between Merger under the Corporation Code and under the Competition Act
A ‘merger’ or ‘acquisition’ as contemplated under the Philippine Competition Act does not strictly
refer to a merger or consolidation as found under the corporation code. Rather, it refers to any
4 Id. §15 (d).

5 Id. §15 (e).
6 Id. §15 (f).
7 Id. §15 (g).
8 Philippine Competition Act, §15 (h).
9 Id. §15 (i).
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transaction that to serves to transfer control of an economic entity to another, or the joining of two
such entities into a single business medium.
AOG - Hence, note the definition of merger under Section 4 – J of the Competition Act, as opposed
to the Corporation Code’s Sec.76 definition:
Corporation Code Philippine Competition Act

Two or more corporations may merge into Refers to the joining of two (2) or more entities
a single corporation which shall be one of into an existing entity or to form a new entity.
the constituent corporations or may
consolidate into a new single corporation
which shall be the consolidated
corporation.
Q. What Mergers are prohibited under the PCA?

A. Section 20. Prohibited Mergers and Acquisitions Merger or acquisition agreements that
substantially prevent, restrict or lessen competition in the relevant market or in the market for
goods or services as may be determined by the Commission shall be prohibited.
Q. What are the exemptions to the Prohibited Mergers?

A. Section 21. Exemptions from Prohibited. Mergers and Acquisitions. – Merger or acquisition
agreement prohibited under Section 20 of this Chapter may, nonetheless, be exempt from
prohibition by the Commission when the parties establish either of the following:
(a) The concentration has brought about or is likely to bring about gains in efficiencies that
are greater than the effects of any limitation on competition that result or likely to result
from the merger or acquisition agreement (‘efficiency gain defense’); or
(b) A party to the merger or acquisition agreement is faced with actual or imminent
financial failure, and the agreement represents the least anti-competitive arrangement
among the known alternative uses for the failing entity’s assets (‘failing firm defense’).
Provided, That an entity shall not be prohibited from 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 or acquiring or maintaining its market share in a relevant market
through such means without violating the provisions of this Act (‘prior acquisition defense’):
Provided, further, That the acquisition of the stock or other share capital of one or more
corporations solely for investment and not used for voting or exercising control and not to
otherwise bring about, or attempt to bring about the prevention, restriction, or lessening of
competition in the relevant market shall not be prohibited (‘investment purpose defense’).
Q. Who has the burden of proving the exemption?

A. Section 22. Burden of Proof. – The burden of proof under Section 21 lies with the parties seeking
the exemption. A party seeking to rely on the exemption specified in Section 21(a) must
demonstrate that if the agreement were not implemented, significant efficiency gains would not be
realized.
Q. What is meant by incontestability of mergers?
24
A. Section 23. Finality of Ridings on Mergers and Acquisitions. – Merger or acquisition agreements
that have received a favorable ruling from the Commission, except when such ruling was obtained
on the basis of fraud or false material information, may not be challenged under this Act.
Q. What is a ‘Motu Propio’ Review?

A. Section 3.3. Notwithstanding Section 3.1 above, nothing prevents the PCC from reviewing a
merger on its own initiative if there are reasonable grounds to believe that Section 17 or 20 of the
Act has been or is likely to be infringed. In the course of its market surveillance activities, the PCC
may identify mergers that may potentially raise concerns under the Act and gather information
about the merger and its effect on competition. For this purpose, it may exercise its power to
require production of documents or information from the merger parties and third parties. (PCC
Rules of Merger Procedure)
AOG: See also Grab and Uber Merger.
Q. Distinguish Ex-Ante and Ex-Post Merger Control,

A.
Ex-Ante Ex-Post
Ex ante merger control Ex post merger control
• seeks to restrain those • provides a mechanism for
mergers, which, if agencies to assess
allowed to go forward, different approaches in
would likely reduce treating mergers, thus
competition confirming the basis for
• Without ex ante merger predictions and remedy
control, the risk of design
breach of competition • May, however, run the risk
law prohibitions would of breach of competition
arguably be greater. law.
Q. What is Counterfactual Analysis?

A. An analysis by the PCC of the likely outcomes should the merger be i) approved, or ii) blocked.
The Commission generally adopts the prevailing conditions of competition or the pre-merger
situation as the counterfactual against which to assess the impact of the merger. However, the
Commission, based on the evidence available to it, may consider the likely scenarios other than the
prevailing conditions (e.g. one of the merger firms would inevitably have exited from the market or
where there is a realistic prospect of a new entrant in the market), in its construction of the
counterfactual.
Q. What is SSNIP or Hypothetical Monopolist Test?

A. The “hypothetical monopolist” or “SSNIP” test is a methodological tool that may be used to
determine the relevant market(s) in which to analyze the competitive effects of a proposed merger.
The SSNIP test is not a tolerance level for price increases resulting from a merger. It generally
identifies a product and a geographic space in which a hypothetical monopolist would profitably
exercise market power. Under this test, the Commission identifies the relevant market as a product
or group of products and a geographic area in which it is produced or sold, for which a hypothetical,
profit- 9 maximizing firm, not subject to price regulation, that was the only present and future
producer or seller of the product(s) in that area, would likely impose a “small but significant and
non-transitory increase in price” (commonly referred to as a “SSNIP”), assuming the terms of sale
for all products outside the candidate market are held constant. “SSNIP” The Commission applies
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the SSNIP test to a candidate market of each product produced or sold by each of the merging
firms, assessing what would happen if a hypothetical monopolist of that product imposed at least a
SSNIP on that product, while the terms of sale of all other products remained constant.
If the hypothetical monopolist would not profitably impose such a price increase because of
substitution by customers to other products, the candidate market is not a relevant product market
by itself. The Commission then adds to the product group the product that is the next-best
substitute for the merging firm’s product and apply the SSNIP test to a candidate market of the
expanded product group. This process continues until a group of products is identified such that a
hypothetical monopolist supplying the product(s) would be able to exercise market power and
profitably impose a SSNIP in the candidate market. The relevant product market generally will be
the smallest group of products that satisfies this test. (PCC Merger Review Guidelines 5.10)
Q. What is the HHI or Herfindahl Hirschman Index?

A. The Herfindahl-Hirshman Index (HHI), among other tools for measuring market concentration,
helps interpret market share data. The HHI is calculated by summing the squares of the market
shares of all the firms active in the market. When using HHIs, the Commission considers both the
post-merger level of the HHI and the increase in the HHI resulting from the merger. The increase in
the HHI is equal to twice the product of the market shares of the merging firms.
Q. What is the Lerner Index of Monopoly Power?

A. The Lerner index measures a firm's level of market power by relating price to marginal cost.
Therefore, Lerner index will always be a number between 0 and 1: the closer it is to 0, the closer it is
to perfect competition; the closer it is to 1, the higher market power the seller has and hence closer
to a monopoly.
Q. What is Cellophane Fallacy or Dupont Doctrine?

A. The Cellophane Fallacy (also known as Gingerbread Paradox) describes a type of incorrect
reasoning used in market regulation methods. The paradox arises when a firm sells a product with
few substitutes, which in turn allows the firm to increase the price of that product.
Q. What is Gun-Jumping?
A. Gun Jumping is the consummation of a merger without prior notification to the PCC, or if such
notification is filed, without waiting for the requisite clearance from the Mergers and Acquisitions
office.
Q. What is a State of Play Meeting?

A. A State of Play meeting is a voluntary meeting between notifying parties and the competition
authority conducted to facilitate a merger review. The objective of the State of Play meetings is to
contribute to the quality and efficiency of the decision-making process and to ensure transparency
and communication between DG Competition and the notifying parties. As such these meetings
should provide a forum for the mutual exchange of information between DG Competition and the
notifying parties at key points in the procedure. They are entirely voluntary in nature.
State of Play meetings may be conducted in the form of meetings at the Commission’s premises, or
alternatively, if appropriate, by telephone or videoconference. In order for the meetings to operate
properly they should be carefully prepared on the basis of an agenda agreed in advance. Further,
senior DG Competition management will normally chair the meetings. (DG Competition Best
Practices on the conduct of EC merger proceeding)
Q. Describe the Merger Notification Process
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A. Pursuant to its authority under the Philippine Competition Act, the PCC has promulgated the
guidelines for determination of whether a transaction is covered in the Implementing Rules and
Regulations of the PCA.
Section 5 of Rule 4 of the Implementing Rules and Regulations of the Philippine Competition
Act lays down the notification process as follows:
SECTION 5. Procedure for notification and review.
(a) Each party to a merger or acquisition required to give notification to the

Commission shall submit the Notification Form and pay such applicable fees as may
be determined by the Commission. An electronic copy of the Form and a scanned
copy of the certification referred to in subparagraph (b) of this Section, contained in
a secure electronic storage device, shall likewise be submitted to the Commission,
simultaneous with the filing of the aforementioned hard copy.
(b) The Form must be signed by a general partner of a partnership, an officer or

director of a corporation, or in the case of a natural person, the natural person or
his/her legal representative, and certified that the contents of the Form are true and
accurate of their own personal knowledge and/or based on authentic records. In all
cases, the certifying individual must possess actual authority to make the
certification on behalf of the entity filing the notification.
(c) The parties may notify, on the basis of a binding preliminary agreement in
any form, such as a memorandum of agreement, term sheet, or letter of intent.
Each of the acquired and acquiring entities must submit an affidavit with their
Forms, attesting to the fact that a binding preliminary agreement has been
executed and that each party has an intention of completing the proposed
transaction in good faith.
(d) Both the certification and the affidavit must be notarized or otherwise
authenticated.
(e) Except as described below, the waiting period begins after all notifying
entities have filed their respective Forms, together with the corresponding
certifications and affidavits, and have been notified by the Commission that the
Forms are complete.
(1) In voting securities acquisitions, such as tender offers, third party and open
market transactions, in which the acquiring entity proposes to buy voting securities
from shareholders of the acquired entity, rather than from the entity itself:
i. the acquiring entity is required to serve notice on the issuer of those shares
to ensure the acquired entity is aware of its reporting obligation;
only the acquiring entity must submit an affidavit. The acquiring entity must state in
the affidavit that it has an intention of completing the proposed transaction in good
faith, and that it has served notice on the acquired entity as to its potential
reporting obligations (and in tender offers, the acquiring entity also must affirm
that the intention to make the tender offer has been publicly announced); and
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iii. the waiting period begins after the acquiring entity files a complete Form.
(f) Upon submission of the Form, the Commission shall determine within
fifteen (15) days whether the Form and other relevant requirements have been
completed in accordance with applicable rules or guidelines, and shall inform the
parties of other information and/or documents it may have failed to supply, or issue
a notice to the parties that the notification is sufficient for purposes of commencing
Phase I review of the merger or acquisition.
(g) The waiting period under this Section shall commence only upon the
Commission’s determination that the notification has been completed in
accordance with applicable rules and guidelines.
(h) Within thirty (30) days from commencing Phase I review, the Commission
shall, if necessary, inform the parties of the need for a more comprehensive and
detailed analysis of the merger or acquisition under a Phase II review, and request
other information and/or documents that are relevant to its review.
(i) The issuance of the request under the immediately preceding paragraph has the
effect of extending the period within which the agreement may not be consummated for an
additional sixty (60) days. The additional sixty (60) day period shall begin on the day
after the request for information is received by the parties; Provided, that, in no case shall
the total period for review by the Commission of the subject agreement exceed ninety (90)
days from the time the initial Provided further, that should the parties fail to provide the
requested information within fifteen (15) days from receipt of the said request, the
notification shall be deemed expired and the parties must refile their notification.
Alternatively, should the parties wish to submit the requested information beyond the
fifteen (15) day period, the parties may request for an extension of time within which to
comply with the request for additional information, in which case, the period for review
shall be correspondingly extended.
(j) Parties to a proposed transaction under review shall inform the Commission of any
substantial modifications to the transaction. On the basis of the information provided, the
Commission shall determine if a new notification is required.
(k) Where notification of a transaction is not required, then the periods provided above
for the Commission to conclude its review shall not apply.
(l) The Commission, in its discretion, may terminate a waiting period prior to its
expiration.
(m) When either waiting period set out ends on a Saturday, Sunday or holiday, the
waiting period is extended until the next business day.
(n) When the above periods have expired and no decision has been promulgated for
whatever reason, the merger or acquisition shall be deemed approved and the parties may
proceed to implement or consummate it.
(o) All notices, documents, and information provided to or emanating from the
Commission under Sections 4 and 5 of this Rule shall be subject to the confidentiality rule
under Section 34 of the Act and Section 13 of this Rule, except for the purpose of enforcing
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the Act or these Rules, or when the release of information contained therein is with the
consent of the notifying entity or is mandatorily required to be disclosed by law or by a valid
order of a court of competent jurisdiction, or of a government or regulatory agency,
including an exchange.
Q. How do you determine if Notification is required?

A. You test via the Size of Person and Size of Transaction tests in relation to the prescribed
transaction threshold.
Q. What is Size of Person/Party Test?

A. The size of the party pertains to the computation of the aggregate value of the assets in the
Philippines and revenues from sales in, into, or from the Philippines of the filing Ultimate Parent
Entity (“UPE”), including all entities that it controls, directly or indirectly (Implementing Rules and
Regulation of thePhilippine Competition Act of 2015 (PCA IRR), Rule 4, Section 3).
Q. What is Size of Transaction Test?

A. The size of the transaction, on the other hand, pertains to the computation of the aggregate
value of the assets being acquired in the Philippines and gross revenues generated from those
assets or from sales in, into, or from the Philippines of the entities subject of the proposed merger,
acquisition or joint venture. (Implementing Rules and Regulation of the Philippine Competition Act
of 2015 (PCA IRR), Rule 4, Section 3).
Q. What is an Ultimate Parent Entity (UPE)?

A. “Ultimate Parent Entity” (UPE) is the juridical entity that, directly or indirectly, controls a
party to the transaction, and is not controlled by any other entity as defined in Rule 2(m) of
the IRR notification by the parties is deemed complete as provided under paragraph (f) of this
Section;
AOG – The UPE is the entity that is ultimately looked at for purposes of determining the proper
Notifying Group.
Q. What is ‘Control’ for purposes of Merger Review?

A. “Control” refers to the ability to substantially influence or direct the actions or decisions of an
entity, whether by contract, agency or otherwise.
Q. What is meant by the PCC’s expanded power of control determination?

A. “Control” refers to the ability to substantially influence or direct the actions or decisions of an
entity, whether by contract, agency or otherwise. Assessment of whether the acquisition will
bestow control to the acquiring entity requires a case-by-case analysis of the entire relationship
between the merging parties. In making this assessment, the Commission will evaluate not only the
legal effect of any instrument, deed, assignment, or any other agreements between the merger
parties but also other relevant circumstances such as the source of financing for the acquisition,
family links and economic relationships.
Q. Distinguish Legal and De Facto Control under the PCA.

A. Control of an entity may either be legal or de facto. Such control may be acquired by an entity
acting alone or by two or more entities acting together. The control acquired may be over one (1) or
more entities or over the whole or part of another entity or assets, including goodwill, brand, or
licenses, of such entity. Examples of acquisitions are buying a majority stake in an entity and
transfer or pooling of assets.
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De Facto control is acquisition of the whole or part of the assets of an entity also includes those
acquisitions which result in an entity being in a position to replace, or substantially replace, the
acquired entity in the business or in part of the relevant business, or allow an acquirer to build up a
market presence or develop market access within a reasonably short period of time
Q. When is there a presumption of Control under the PCA?

A. Control is presumed to exist when the acquisition will result in the parent of the acquiring entity
owning directly or indirectly, through its subsidiaries, more than one half (1/2) of the voting power
of the entity to be acquired, unless in exceptional circumstances, it can clearly be demonstrated
that such ownership will not constitute control.
Where the ownership is one half (1/2) or less of the power of the entity to be acquired, control is
presumed to exist if:
a. there is power over more than one half (1/2) of the voting rights by virtue of an
agreement with investors;
b. there is power to direct or govern the financial and operating policies of the entity under
a statute or agreement;
c. there is power to appoint or remove the majority of the members of the board of
directors or equivalent governing body;
d. there is power to cast the majority votes at meetings of the board of directors or
equivalent governing body;
e. there exists ownership over or the right to use all or a significant part of the assets of the
entity; or
f. there exist rights or contracts which confer decisive influence on the decisions of the
entity.
Q. How many notifications must there be in a covered transaction?

A. There must be two. One notification will come from the Acquiring Entity’s Notifying Group, and
another Notification with come from the Acquired Entity’s Notifying Group. BOTH parties
notification must be sufficient in form and substance for the PCC to proceed to review the merger.
Q. Who is included in the Notifying Group for purposes of Merger Review?

A. The Notifying Group includes all of the following, as may be determined by the Mergers and
Acquisitions Office:
For Acquiring Entity’s Notifying Group:
(a) For the acquiring entity, initially provide the specified information only
for the entities within its Notifying Group which operated in the same line
of business with the acquired entity and the entities it controls.
(b) For the acquiring entity, initially provide the specified information only
for the entities within its Notifying Group which were in a vertical
relationship in a market with the acquired entity and entities it controls.
(c) MAO may nevertheless require submission of information on the
entities within the Notifying Group of the acquired entity.
(d) For each overlapping lines of business, description of product(s) and/or
service(s) should be made per type of product or service and per brand (for
products).
For Acquired Entity’s Notifying Group:
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(a) For the acquired entity, initially provide the specified information only
for the acquired entity and entities it controls which operated in the
same line of business with the acquiring entity and entities within its
Notifying Group.
(b) For the acquired entity, initially provide the specified information only
for the acquired entity and entities it controls which were in a vertical
relationship in a market with the acquiring entity and entities within its
Notifying Group.
(c) MAO may nevertheless require submission of information on the entities
within the Notifying Group of the acquired entity.
(a) For vertical relationships, the economic participants refer to other

entities in the supply chain where the acquiring and acquired entities are
operating.
(b) For horizontal overlaps, the economic participants refer to the competitors
of each party to the overlapping lines of business.
Q. What other matters must be included in a merger notification?

A. (a) Prior acquisitions over the past five (5) years refer to acquisitions made of
shares, non--‐corporate interests or assets of entities that have assets in the Philippines
or generate revenues from sales in, into or from the Philippines, which are related to the
notified transaction, e.g. those between the same parties or their affiliates, or where the
assets previously acquired and are to be acquired under this notification belong to
horizontally or vertically related markets.
(b) Contemporaneous or concurrent related acquisitions are those acquisitions that are
related to the notified transaction, e.g. those between the same parties or their affiliates
or where the assets acquired and are to be acquired under this notification belong to
horizontally or vertically related markets.
Q. What are the Thresholds for Compulsory Notification, and how are they Computed?
A. SECTION 3. Thresholds for compulsory notification.
Parties to a merger or acquisition are required to provide notification when:
AOG – Note that this has now been amended by Memorandum Circular No. 18-001. Said circular
has raised the new thresholds to P5 Billion for the Size of Person and P2 Billion for the Size of
Transaction as defined in the Implementing Rules and Regulations.
Note Further that there is now an automatic threshold adjustment proviso, with automatic
adjustment of the threshold every year beginning March 1, 2019 based on the official estimate of
the nominal Gross Domestic Product (GDP) growth of the previous calendar year rounded up to the
nearest hundred millions.
(a) The aggregate annual gross revenues in, into or from the Philippines, or value of the assets
in the Philippines of the ultimate parent entity of at least one of the acquiring or acquired entities,
including that of all entities that the ultimate parent entity controls, directly or indirectly, exceeds
One Billion Pesos (PhP1,000,000,000.00).
Note: This is the annual gross revenue component of determining whether a merger is covered, and
should not be confused with the transaction value itself.
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and
(b) The value of the transaction exceeds One Billion Pesos (PhP1,000,000,000.00), as
determined in subsections (1), (2), (3) or (4), as the case may be.
AOG: This is the transaction threshold proper. What follows thereafter are the various
methods prescribed by the commission in determining whether the threshold is reached.
(1) With respect to a proposed merger or acquisition of assets in the Philippines if either
i. the aggregate value of the assets in the Philippines being acquired in the proposed
transaction exceeds One Billion Pesos (PhP1,000,000,000.00); or
Note: This is the asset value method, it looks into the value of the assets in question.
However, it will not be possible to circumvent the notification threshold by proposing a
consideration less than P1 billion because of the Philippine gross revenue method.
ii. the gross revenues generated in the Philippines by assets acquired in the Philippines exceed
One Billion Pesos (PhP1,000,000,000.00).
Note: This is the gross revenue within the Philippine method. Thus, even if the proposed
acquisition price of the assets concerned are less than the value threshold, they may still fall
under the revenue threshold.
(2) With respect to a proposed merger or acquisition of assets outside the Philippines, if
i. the aggregate value of the assets in the Philippines of the acquiring entity exceeds One
Billion Pesos (PhP1,000,000,000.00); and
ii. the gross revenues generated in or into the Philippines by those assets acquired outside the
Philippines exceed One Billion Pesos (PhP1,000,000,000.00).
Note: In the case of mergers or acquisition of assets outside of the Philippines, the
Philippine Competition Commission is only concerned with the potential effects on
competition in the Philippines. Hence, the acquisition of assets outside the country with
aggregate value above the transaction threshold but without gross revenues meeting the
revenue threshold are not subject to compulsory notification. They may, however, be the
subject of voluntary notification.
(3) With respect to a proposed merger or acquisition of assets inside and outside the
Philippines, if
i. the aggregate value of the assets in the Philippines of the acquiring entity exceeds One
Billion Pesos (PhP1,000,000,000.00); and
ii. the aggregate gross revenues generated in or into the Philippines by assets acquired in the
Philippines and any assets acquired outside the Philippines collectively exceed One Billion Pesos
(PhP1,000,000,000.00).
Note: In this case, the concern is primarily the assets acquired in the Philippines or the acquisition of
assets outside the Philippines which are capable of generating revenue within the Philippines that
will meet the threshold amount.
(4) With respect to a proposed acquisition of (i) voting shares of a corporation or of (ii) an
interest in a non-corporate entity
i. If the aggregate value of the assets in the Philippines that are owned by the corporation or
non-corporate entity or by entities it controls, other than assets that are shares of any of those
corporations, exceed One Billion Pesos (PhP1,000,000,000.00); or
32
Note here that the concern is not the value of the voting shares or interest acquired, but the
value of the assets of the entity whose share are to be acquired, as well as any other entities
that entity may control.
ii. The gross revenues from sales in, into, or from the Philippines of the corporation or non-
corporate entity or by entities it controls, other than assets that are shares of any of those
corporations, exceed One Billion Pesos (PhP1,000,000,000.00);
Note here that the concern is now the acquisition of voting shares or an interest in a
corporation which is capable of generating revenue in the country meeting the threshold
amount, not only on its own but also of entities it controls.
and
iii. If
A. as a result of the proposed acquisition of the voting shares of a corporation, the entity or
entities acquiring the shares, together with their affiliates, would own voting shares of the
corporation that, in the aggregate, carry more than the following percentages of the votes attached
to all the corporation’s outstanding voting shares:
I. Thirty-five percent (35%), or

II. Fifty percent (50%), if the entity or entities already own more than the percentage set out in
subsection I above, as the case may be, before the proposed acquisition;
Or
AOG: As can be seen, an acquiring entity does not need to acquire a controlling share of votes in
order for notification to be mandatory. Likewise, entities who already control 35% of the voting
share still need to notify the PCC if they plan a subsequent acquisition which will give them 50% or
more of the voting shares. The purpose of this restriction is to prevent a bypassing of the
mandatory notification requirement by means of a creeping acquisition.
B. as a result of the proposed acquisition of an interest in a non-corporate entity, the entity or

entities acquiring the interest, together with their affiliates, would hold an aggregate interest in the
non-corporate entity that entitles the entity or entities to receive more than the following
percentages of the profits of the non-corporate entity or assets of that non-corporate entity on its
dissolution:
I. Thirty-five percent (35%), or
II. Fifty percent (50%), if the entity or entities acquiring the interest are already entitled to
receive more than the percentage set out in subsection I immediately above before the proposed
acquisition.
AOG: the reasoning for this restriction is that if the acquiring entity is entitled to obtain such
amount of profits, for competition purposes it is effectively obtaining the rewards of controlling the
acquired entity, even if strictly speaking such control is not present.
(c) Where an entity has already exceeded the 35% threshold for an acquisition of voting shares,
or the 35% threshold for an acquisition of an interest in a non-corporate entity, another notification
will be required if the same entity will exceed 50% threshold after making a further acquisition of
either voting shares or an interest in a non-corporate entity.
33
AOG: the rationale of this is two-fold. Firstly, it is to protect against an attempt to bypass the
notification requirement by means of a creeping acquisition. Secondly, it is possible that a 35%
acquisition may not substantially lessen competition, but that control of more than 50% will already
produce a substantial lessening of competition, which would be the case in markets which are more
concentrated or have fewer players.
Determining the Value of Assets and Gross Revenues
The aggregate value of assets in the Philippines shall be based on the last regularly prepared
balance sheet or the most recent audited financial statements in which those assets are accounted
for. The gross revenues from sales of an entity shall be the amount stated on the last regularly
prepared annual statement of income and expense of that entity.10
For joint ventures, the value of assets that will be transferred into the joint venture shall be (i) that
as stated on the last regularly prepared balance sheet or the most recent audited financial
statements in which those assets are accounted for, or (ii) an independent valuation report,
whichever is higher. The value of assets for which agreements have been secured for the joint
venture to obtain shall be the transaction price as stated in such agreement.11
The value of the credit or obligations of the joint venture extended or guaranteed to such joint
venture shall be that as stated in the transaction document that provides for the extended credit or
guaranteed obligation.12
Q. What are the customary stages of a Merger for purposes of the PCA?
A. The Philippine Competition Commission has recognized the customary stages of a merger or
acquisition to be as follows:
1st Phase: Execution of binding preliminary agreement

2nd Phase: Execution of definitive agreement or agreements
3rd Phase: Closing/Completion/Consummation
Q. When May a Notification Be Filed?

A. The Philippine Competition Commission has recognized the customary stages of a merger or
acquisition to be as follows: The PCC has advised that a merger notification may be submitted on
the basis of:
a. A binding preliminary agreement upon its execution;

AOG - A notification at this stage is still optional for the parties.
b. If there is no binding preliminary agreement or parties do not wish to notify at that

stage, notification to the Commission must be made: Prior to the execution of the definitive
agreement or agreements relating to the merger or acquisition. The terms and conditions
of the most recent draft of the definitive agreement or agreements shall be the basis of the
notification;
Note: At this stage, notification is mandatory already upon the parties. Failure to notify at this point
will make the parties liable for gun jumping.
10 PCC MC-No 17-002.

11 Id.
12 Id.
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ii. Prior to the execution of the definitive agreement or agreements involving the Philippine
aspect of the merger or acquisition, where the merger or acquisition is a global transaction requiring
notification in multiple jurisdictions, i.e. three (3) or more jurisdictions outside the Philippines. The
terms and conditions of the global agreement or the most recent draft of the definitive agreement
or agreements relating to the Philippine aspect of the transaction, or both, where appropriate, shall
be the basis of the notification.
Q. What is the latest a notification may be made before an Entity will be held liable for Gun Jumping?
A. Parties must ensure that they notify within thirty (30) days from the signing of definitive
agreements relating to the transaction but prior to any acts of consummation (see Clarificatory
Note [“CN”] No. 16-001).
*AOG- Filing a notification within 30 days from signing but after the performance of acts of
consummation will not be a defense against charges of gun-jumping.
Q. Distinguish Phase I and Phase II Merger Review.

A. Phase I Review
Parties to the merger or acquisition agreement referred to in the preceding section wherein the
value of the transaction exceeds one billion pesos (P1,000,000,000.00) are prohibited from
consummating their agreement until thirty (30) days after providing notification to the Commission
in the form and containing the information specified in the regulations issued by the
Commission: Provided, That the Commission shall promulgate other criteria, such as increased
market share in the relevant market in excess of minimum thresholds, that may be applied
specifically to a sector, or across some or all sectors, in determining whether parties to a merger or
acquisition shall notify the Commission under this Chapter.
This has been denominated by the PCC in the Implementing Rules and Regulations as ‘Phase I’
Review.
Phase II Review
Should the Commission deem it necessary, it may request further information that are reasonably
necessary and directly relevant to the prohibition under Section 20 hereof from the parties to the
agreement before the expiration of the thirty (30)-day period referred. The issuance of such a
request has the effect of extending the period within which the agreement may not be
consummated for an additional sixty (60) days, beginning on the day after the request for
information is received by the parties: Provided, That, in no case shall the total period for review by
the Commission of the subject agreement exceed ninety (90) days from initial notification by the
parties.
This has been denominated by the PCC in the Implementing Rules and Regulations as ‘Phase II’
Review.
Q. What is a State of Play meeting or conference?

A. At any time during the merger review process, the parties and the PCC may agree to a State of
Play meeting to discuss the conduct of the review, identify potential concern, or propose voluntary
commitments.
Private and Criminal Actions and Non-Adversarial Remedies
Q. May a Private Action Be Filed for Violation of the PCA?
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A. Yes. Section 45. Private Action. – Any person who suffers direct injury by reason of any violation
of this Act may institute a separate and independent civil action after the Commission has
completed the preliminary inquiry provided under Section 31.
Q. Who May File?

A. Any person who suffers direct injury.
Q. May a Criminal Action Be Filed for Violation of the PCA?

A. Yes. See Penalties for Section 14 (1).
Q. Who May File?

A. The OFC under the Department of Justice (DOJ-OFC) shall only conduct preliminary
investigation and undertake prosecution of all criminal offenses arising under this Act and other
competition-related laws in accordance with Section 31 of Chapter VI of this Act. The OFC shall be
reorganized and allocated resources as may be required therefor to effectively pursue such
mandate
Q. What circumstances aggravate a criminal violation of the PCA?

A. Section 41. Basic Necessities and Prime Commodities If the violation involves the trade or
movement of basic necessities and prime commodities as defined by Republic Act No. 7581, as
amended, the fine imposed by the Commission or the courts, as the case may be, shall be tripled.
Q. What is the prescriptive period for violations of the PCA?

A. Section 46. Statute of Limitations. — Any action arising from a violation of any provision of this
Act shall be forever barred unless commenced within five (5) years from:
a) For criminal actions, the time the violation is discovered by the offended party, the
authorities, or their agents; and
b) For administrative and civil actions, the time the cause of action accrues
Q. What is Leniency? Under what circumstances leniency may be granted to a violator of the PCA?
A. This is provided for in Section 35 of the PCA:
Sec. 35. Leniency Program. – The Commission shall develop a Leniency Program to be granted to
any entity in the form of immunity from suit or reduction of any fine which would otherwise be
imposed on a participant in an anti-competitive agreement as provided in Section 14(a) and 14(b) of
this Act in exchange for the voluntary disclosure of information regarding such an agreement which
satisfies specific criteria prior to or during the fact-finding or preliminary inquiry stage of the case.
Immunity from suit will be granted to an entity reporting illegal anti-competitive activity before a
fact-finding or preliminary inquiry has begun if the following conditions are met:
a) At the time the entity comes forward, the Commission has not received information
about the activity from any other source;
b) Upon the entity’s discovery of illegal activity, it took prompt and effective action to
terminate its participation therein;
c) The entity reports the wrongdoing with candor and completeness and provides full,
continuing, and complete cooperation throughout the investigation; and
d) The entity did not coerce another party to participate in the activity and clearly was
not the leader in, or the originator of, the activity.
Q. May Leniency be granted even after Preliminary Inquiry?
36
A. Even after the Commission has received information about the illegal activity after a fact-finding
or preliminary inquiry has commenced, the reporting entity will be granted leniency, provided
preceding conditions (b) and (c) and the following additional requirements are complied with:
1) The entity is the first to come forward and qualify for leniency;
2) At the time the entity comes forward, the Commission does not have evidence
against the entity that is likely to result in a sustainable conviction; and
3) The Commission determines that granting leniency would not be unfair to others.
Such program shall include the immunity from any suit or charge of affected parties and third
parties, exemption, waiver, or gradation of fines and/or penalties giving precedence to the entity
submitting such evidence. An entity cooperating or furnishing 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. Such reprisal or discrimination shall be considered a violation of
this Act subject to the sanctions provided in this Act.
Nothing in this section shall preclude prosecution for entities that report to the Commission false,
misleading, or malicious information, data or documents damaging to the business or integrity of
the entities under inquiry as a violation of said section. An entity found to have reported false,
misleading, or malicious information, data, or document may be penalized by a fine not less than
the penalty imposed in the section reported to have been violated by the entity complained of.
The DOJ-OFC may likewise grant leniency or immunity as provided in this section in the event that
there is already a preliminary investigation pending before it.
Q. Where are Criminal and Independent Civil Actions under the PCA filed?
A. Section 44. Jurisdiction of the Regional Trial Court. – The Regional Trial Court of the city or
province where the entity or any of the entities whose business act or conduct Constitutes the
subject matter of a case, conducts its principal place of business, shall have original and exclusive
jurisdiction, regardless of the penalties and fines herein imposed, of all criminal and civil cases
involving violations of this Act and other competition-related laws. If the defendant or anyone is
charged in the capacity of a director, officer, shareholder, employee, or agent of a corporation or
other juridical entity who knowingly and willfully authorized the commission of the offense
charged, the Regional Trial Court of the city or province where such corporation or juridical entity
conducts its principal place of business, shall have jurisdiction.
Q. What is Forbearance? Under what circumstances it may be granted?

A. Forbearance. – The Commission may forbear from applying the provisions of this Act, for a
limited time, in whole or in part, in all or specific cases, on an entity or group of entities, if in its
determination:
(a) Enforcement is not necessary to the attainment of the policy objectives of this Act;
(b) Forbearance will neither impede competition in the market where the entity or
group of entities seeking exemption operates nor in related markets; and
(c) Forbearance is consistent with public interest and the benefit and welfare of the
consumers.
(d) Forbearance is justified in economic terms (Rule 9, Section 1, IRR);
Q. What is Authorization?
A. Authorization – a mechanism through which the public benefit from ostensibly anti-competitive
conduct can be assessed as a counter balancing consideration. The process involved here is a direct
intervention or inquiry by a governing commission. Authorization implies that the commission can
37
“authorize” certain conduct where there is a perceived net benefit to the community from
anticompetitive conduct. (Primer on Competition Policy)
AOG: In the Philippine Competition Act, our ‘authorization’ provision are the provisions on
Forbearance.
Q. What are the procedural requisites for a valid issuance of forbearance?

A. A public hearing shall be held to assist the Commission in making this determination.
The Commission’s order exempting the relevant entity or group of entities under this section shall
be made public. Conditions may be attached to the forbearance if the Commission deems it
appropriate to ensure the long-term interest of consumers.
In the event that the basis for the issuance of the exemption order ceases to be valid, the order may
be withdrawn by the Commission.
Provided, that forbearance will be granted for a maximum period of one year. Any extension to the
period will have to be expressly approved by the Commission. Any extension of the duration of an
exemption shall not be longer than one year.
Q. Is forbearance applicable to all provisions of the PCA?

A. No, it only applies to Section 14 and 15, and has no application to Merger Control provisions
(Majority View, PCC Case No. M-2017-001). Yes, according to the minority view: It is very apparent
from the cited provision that the Commission has the power to forbear from applying the provisions
of the Act in whole or in part. Section 28 does not make any qualification as to which provisions of
the Act the power to forbear may be used. Henceforth, in the context of Section 17 (paragraph 2)
the Commission is with authority not to impose both the void penalty and the administrative fine,
or solely the void penalty or the administrative fine.
The majority errs on the following points relating to forbearance. First, nowhere does it state in
Section 28 of the Act that forbearance must be at the instance of the parties. The law is clear.
Second, the Act does not limit application of forbearance to Sections 14 and 15. While the law is
clear. The basis for the majority's reference to the Commission making a position to the contrary is
unclear. Third, the Act does not impose a timing requirement on the initiation of forbearance
proceedings.
*AOG- It appears the minority view is the correct view. Other jurisdictions have allowed
forbearance with respect to violations of notification rules. (Securities Offering Reform, Securities Act
Release No. 33-8591, 70 Fed. Reg. 44722 (Aug.3,2005).)
38

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REVIEWER on the Philippine Competition Act and its Implementing Rules and Regulations

Written by Atty. Abraham Alonzo O. Guiyab

THE PHILIPPINE COMPETITION ACT (R.A. 10667)

Q. What is the Full Title of the Law?

Q. What is the significance of including ‘Prohibiting Anti-Competitive Agreements, Abuse of Dominant

Q. What is the Short Title of the Law?

Q. What is meant by Competition Law?

Q. What is meant by Competition Policy?

Q. When is National Competition Day?

Legal Basis for the enactment Philippine Competition Act

Q. From what law was the Philippine Competition Act derived?

Short answer: Sherman Act, as amended.

*AOG – See also PCC Case No. M-2017-001.

Q. What is the Constitutional Basis for the PCA?

Q. Explain the evolution of this provision?

Q. Illustrate the evolution of Competition Laws in the Philippines.

1. There in fact exists a monopoly or an oligopoly, and

2. Public interest requires its regulation or prohibition.

Public Policy behind the Philippine Competition Act

Q. What is the Declaration of Policy of the PCA?

Q. What is meant by ‘Efficiency’ under Section 2?

Q. What is Market Failure?

Scope of the Philippine Competition Act

Q. What is the Scope of the Philippine Competition Act?

Q. What is meant by trade, industry, or commerce?

Q. Does it apply to non-profit activities?

Q. Does it apply to overseas commerce?

Q. Does it apply to government corporations?

*AOG – It does not apply to unincorporated government instrumentalities, nor to government

(b) To avoid undue or unfair competition, government corporations operating in a particular

Q. Does it apply to labor and collective bargaining?

Q. Does it apply to Trade Associations?

The Philippine Competition Commission

Q. What is the Philippine Competition Commission?

The Commission shall be an attached agency to the Office of the President.

Q. What is the composition of the Philippine Competition Commission?

Section 6. Composition of the Commission. – The Commission shall be composed of a Chairperson

Q. What are the powers of the Philippine Competition Commission?

(1) Where there is no equally effective behavioral remedy; or

(n) Intervene or participate in administrative and regulatory proceedings requiring consideration of

(r) Advocate pro-competitive policies of the government by:

*AOG – This is the Merger Review of the PCC.

*AOG – This is part of the Policy Review power of the PCC.

(d) Stop or redress anti-competitive conduct by applying Remedies

*AOG – This is part of the enforcement power of the PCC.

*AOG – This is part of the enforcement power of the PCC.

*AOG – This is part the investigatory power of the PCC.

*AOG – This is part the investigatory power of the PCC.

(h) Issue adjustment or divestiture orders

*AOG – This is part of the enforcement power of the PCC.

*AOG – This is part of the enforcement power of the PCC.

*AOG – This is part of the enforcement power of the PCC.

(k) Issue advisory opinions and guidelines on competition Matters

*AOG – This is part of the policy review power of the PCC.

*AOG – This is part of the policy review power of the PCC.

(m)Conduct, publish, and disseminate studies and reports on anti-competitive conduct

*AOG – This is part of the policy review power of the PCC.

(n) Intervene or participate in administrative and regulatory proceedings requiring consideration of

*AOG – This is part of the policy review power of the PCC.

*AOG – This is part of the policy review power of the PCC.

*AOG – This is part of the policy review power of the PCC.

*AOG – This is part of the policy review power of the PCC.

(r) Advocate pro-competitive policies of the government