Philippine Competition Act
Lecture with Atty. Leah Sebastian
What Competition law does not seek to do?
 Seeks to primarily regulate markets,
not individual entities
 Does not seek to replace the
competitive process with regulation
 Not a price control act
 Does not dictate or control price
 Does not define business strategies
or impose business models
 Does not penalize aggressive and
vigorous competition if fair and
lawful.
 Does not penalize competitors for
being large and profitable, as long as
this is legitimately achieved
 Does not “save” efficient
competitors from naturally exiting
the market
 Does not ensure viability of small
competitors
 Does not intend to make
competition convenient
 Does not prohibit genuine industry
cooperation even among
competitors
 Does not dictate terms and
conditions of trade
Prohibited Acts in Competition Law (3 pillars
of PCA per Atty. Sebastian):
 Anti-competitive agreements
 Abuse of dominant position
 Anti-competitive mergers
*** All involve agreements and conduct
*** All involve the supply chain
*** All involve relevant market
*** All involve entities and economic
activity
Competition Authority
 Philippine Competition Commission
– original and primary jurisdiction
Agreement and Conduct under the PCA
 Agreement: refers to any type or
form of contract, arrangement,
collective recommendation, or
concerted action, whether formal or
informal, explicit or tacit, written or
oral
 Conduct: refers to any type or form
of undertaking, collective
recommendation, independent or
concerted action or practice,
whether formal or informal
Sharing commercially sensitive information
(bawal daw to ha because it substantially
lessens competition)  using shared
information individually to align prices 
prices for products aligned based on shared
information
 Concerted action: exchange of
confidential cost information to
coordinate future prices or to fix
prices
 Any type or form of understanding:
bidders agree to manipulate bid
results—patterns in their bid prices
may constitute evidence of
agreement
Relevant Market in the PCA
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.
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 relevant
geographic market
 Relevant product market –
interchangeable or substitutable.
Kung meryenda, pwede ka mag
pandesal or tasty. Kung ayaw mo
antukin, pwede ka mag coke,
coffee, or tea. So there is a
threat of switching based on the
characteristics, prices, and
intended use. So hindi pwede
magtaas ng sobra ng price si
pandesal para hindi lahat
nakafocus kay tasty. The fact na
may substitutable product and
may papalit sayo, magiingat ka
kasi meron competitive pressure
or constraint.
 Relevant geographic market –
pwedeng Makati lang ang
market mo. Pwedeng hindi
pwede sa Mindanao kasi yung
product hindi naman halal.
RPM: What affects substitutability? “How
far buyers will go to substitute one product
for another?”
RGM: What affects the bound of the
geographic area?
Determining or defining the relevant
market:
Sec. 24
Defining RM: Hypothetical Monopolist or
SSNIP Test
 A hypothetical, profit maximizing
firm, not subject to price regulation,
and the only present and future
producer or seller of the product in
the geographic area identified who
would likely impose a SSNIP
 SSNIP: Small but significant non-
transitory increase in price
o Price increase of 5% to 10%
o Lasting 1-3 years depending
on market conditions and
type of market
 Question to ask in SSNIP Test (RPM):
o Would the hypothetical
monopolist of peanuts be
able to profitably impose a
SSNIP on peanuts?
 If Yes (SSNIP is profitable), candidate
market (peanuts) is the RM
 If No (SSNIP is unprofitable because
of the substitute), candidate market
is not the RM.
o So they can switch to
Cashew, or pili nuts  this is
your RM
 RGM:
o Would the hypothetical
monopolist of peanuts be
able to profitably impose a
SSNIP on Nueva?
 If No (SSNIP is unprofitable because
of the substitute), candidate market
is not the RM
o Consumer can switch to
Pangasinan or Ilocos, if wala
ng malipatan  this is your
RM
 Basically, you have to look into how
wide or narrow the relevant market
is
Defining RM: Cross-price elasticity of
demand
 A tool that measures the rate at
which the quantity of a product sold
changes when the price of another
product goes up or down. When the
cross-price elasticity is positive,
those products are substitutes; if
they are negative, those products
are complements. Where there is
 zero cross-elasticity, the products in
question are unrelated.
 Pag tumaas price ng pancake,
bababa ang demand ng pancake
syrup.
Defining RM: Diversion Ratios
 Provide a direct measure of the
closeness of competition between
products.
Defining RM looks at:
 Demand side substitution
 Supply side substitution
Scope and Application – enforceable against
any person or entity
The PCA applies to GOCCs when they
engage in economic activity
Economic activity – activities that generate
profits or dividends for shareholders as well
as those conducted on a not-for-profit basis
Example:
 GOCCs performs a proprietary
function
 Competes in the market place
 Derive their income solely from
commercial transactions in
competition with the private sector
BUT PCA does not apply to government
instrumentalities that do not perform
proprietary function
Principle of competitive neutrality
 State-owned enterprises and private
firms are able to compete on equal
terms
PCA applies to activities conducted on not-
for-profit basis
 Non-stock, non-profit entities would
be subject to the PCA when they
engage in commercial activities
incidental to their operations,
although they are not allowed by
law to distribute profits to their
members, and any profit obtained
incidental to operations shall be
used for furtherance of its corporate
purposes.
 Are non-stock, non-profit entities
capable of anti-competitive behavior
like their stock, for profit
counterparts?
?? PCA does not apply if designed solely to
facilitate collective bargaining
How do we treat competition with foreign
entities in PH?
 Absent any showing that the
competition expected in the
construction industry; should we
open the same to foreigners, would
be unfair to our citizens, the industry
should not be restricted to Filipinos
only.
 It would encourage healthy
competition among local and foreign
contractors and the market will have
alternative options depending on
the needs of each construction
project
 It is not unconstitutional. The court
only frowns upon unfair foreign
competition