The “Philippine Competition Act” (PCA)

R.A. 10667
Approved on July 21, 2015

WHAT IS THE PHILIPPINE COMPETITION ACT?

The PCA is the primary law in the Philippines enacted to promote and protect market competition. The law defines,
prohibits, and penalizes anti-competitive practices, with the aim:

1) To enhance economic efficiency and promote free and fair competition in trade, industry and all commercial
economic activities.
2) To prevent economic concentration which will control the production, distribution, trade, or industry that will
unduly stifle competition, lessen, manipulate or constrict the discipline of free markets.
3) To penalize all forms of anti-competitive agreements, abuse of dominant position and anti-competitive
mergers and acquisitions, with the objective of protecting consumer welfare and advancing domestic and
international trade and economic development.

IMPLEMENTING AGENCY

The Philippine Competition Commission (PCC)

The PCC is an independent quasi-judicial government agency mandated to implement the national competition
policy and enforce the PCA. It has original and primary jurisdiction over the enforcement and implementation of the PCA
and its IRR. Established in February 2016, the PCC is the main authority on competition-related matters in the country.

As the antitrust authority of the country, the PCC is mandated to exercise the following powers and functions:

● Conduct inquiry, investigate, and hear and decide on cases involving violations of the PCA, its implementing rules,
and other competition laws;
● Monitor and analyze the practice of competition in markets, and issue advisory opinion, rules, and guidelines on
competition matters for the effective enforcement of the PCA; and
● Conduct, publish, and disseminate studies, reports, and other publications on competition matters to inform and
guide the industry and consumers.

SCOPE AND APPLICATION

Who and what are covered in the Philippine Competition Act?

The PCA covers any person or entity engaged in trade, industry, and commerce in the Philippines. The law also
applies to international trade that may impact trade, industry, and commerce in the country. The law, however, does not
apply to collective bargaining agreements or arrangements between workers and employers and activities to facilitate
collective bargaining agreements in respect of conditions of employment.

PROHIBITED ACTS:

1. Anti-Competitive Agreements
2. Abuse of Dominant Position
3. Anti-Competitive Mergers and Acquisitions

1. ANTI-COMPETITIVE AGREEMENTS

What are Anti-Competitive Agreements?

Anti-competitive agreements include agreements between or among competitors that substantially prevent, restrict
or lessen competition. Such agreements may be in the form of a contract, arrangement, understanding, collective
recommendation, or concerted action, whether formal or informal, explicit or tacit, written or oral.

Also known as cartels, anti-competitive agreements between or among competitors involve collusive conduct to fix
prices, rig bids, limit output, or allocate the market.
 Under the PCA, there are anti-competitive agreements that are per se prohibited (Section 14[a]) and there are
agreements that are prohibited for having an anti-competitive object or effect (Section 14[b] and [c]).

What are per se violations?

These anti-competitive agreements that are inherently illegal and require no further inquiry into their actual effect
on the market or the intentions of the parties who engaged in the illegal act or agreement. The Philippine Competition Act
classifies price fixing and bid rigging as per se violations.

Price Fixing Bid Rigging

- involves restricting competition as to price, or components
thereof, or other terms of trade. This happens when
competitors agree on the price of goods or services, rather
than independently setting their respective prices
- fixing prices at an auction or any form of bidding, including
cover bidding, bid suppression, bid rotation, and market
allocation, among others. Bid-rigging usually occurs when
parties participating in a tender coordinate their bids rather
than submit independent proposals

What are not per se violations?

Not per se violations are other anti-competitive agreements prohibited by the law which have the object or effect of
substantially preventing, restricting, or lessening competition. Since these agreements are not per se illegal, the PCC needs
to conduct inquiries to determine whether they restrict competition and violate the PCA.

Supply Restriction/Output limitation Market Sharing

- is an agreement by two or more competitors which sets or
limits production levels and create an artificial supply
shortage, thereby raising prices. Similar forms of anti-
competitive agreements include restrictions in markets,
technical development, or investment.
- a collusive agreement by two or more competitors which
divides or allocates the market. Market sharing not only
includes territories, but also customers, volume of sales or
purchases, and type of goods or services, among other
considerations.

What are the exceptions to the coverage of anti-competitive agreements?

Agreements not falling under Section 14(a) and 14(b) of the PCA that have an anti-competitive object or effect, but
nevertheless contribute to improving production or distribution of goods or services within the relevant market, or promoting
technical and economic progress while allowing consumers a fair share of the resulting benefit may not necessarily be
considered anti-competitive. (Note: This only applies to Section 14 (c) of the PCA).

2. ABUSE OF DOMINANT POSITION

A business may become dominant in a certain industry by gaining a significant share in the market or becoming an
industry leader by virtue of years in operation.

In the conduct of their business, dominant companies – considering their size, scope, and position of economic
strength – may have a disproportionately severe effect on the market. The PCA defines abuse of dominant position as a
conduct of an entity, whether a company or an individual, with dominant position that substantially prevents, restricts, or
lessens competition in the market.

How do firms abuse their dominant position?

Markets that are dominated by a single or a handful of large companies are particularly vulnerable to anti-
competitive practices. Such conduct that might indicate abuse of dominance includes the following:

A. Predatory pricing - A dominant firm deliberately incurs losses in the short term by selling goods or services below the
cost of its production, which can eventually force its competitors out of business.

B. Imposing barriers to entry. 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
C. Tying/Bundling. 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.

D. Price discrimination. Setting prices or other terms or conditions that discriminate unreasonably between customers or
sellers of the same goods or services.

E. Exploitative behavior towards customers, or competitors. Imposing restrictions on the lease or contract of sale or
trade of goods or services concerning where, to whom, or in what form 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.

F. Restrictions or Refusals to supply or Refusal to deal. 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.

G. Monopsony. Directly or indirectly imposing unfairly low purchase prices for the goods or services of, among others,
marginalized agricultural producers, fisherfolk, micro, small, and medium enterprises (MSMEs), and other marginalized
service providers and producers

H. Directly or indirectly imposing unfair purchase or selling price on their competitors, customers, suppliers or consumers

I. Blocking of Access to Essential Facilities. Limiting production, markets or technical development to the prejudice of
consumers.

What are the exceptions to the coverage of abuse of dominance?

Any conduct which contributes to improving production or distribution of goods or services within the relevant
market, or promoting technical and economic progress while allowing consumers a fair share of the resulting benefit may
not necessarily be considered an abuse of dominant position.

Additionally, the acquisition, maintenance, and increase of market share does not violate the PCA if:

● It is acquired through legitimate means, such as having superior skills, rendering superior service, producing or
distributing better-quality products, having business acumen, and using and enjoying intellectual property rights;
and
● It does not substantially prevent, restrict, or lessen competition in the market.

“It is not illegal to be dominant provided that a business does not take advantage of its dominance to substantially
lessen competition in the market.”

3. ANTI-COMPETITIVE MERGERS AND ACQUISITIONS

What are M&As?

A merger refers to the joining of two or more entities into an existing entity or to form a new entity. Acquisition
refers to the purchase of securities or assets for the purpose of obtaining control of another entity.

M&As can benefit consumers because they may lead to businesses that operate more efficiently, and bring the
prices of their products down. They enable the transfer of technologies, broaden access to capital and increase productivity
which will in turn enhance the global competitiveness of Philippine companies. However, there are M&As that harm
competition and can be disadvantageous to consumers.

What are prohibited mergers and acquisitions?

Anti-competitive mergers and acquisitions (M&As) refer to transactions that substantially lessen, restrict, or prevent
competition in the relevant market as determined by the PCC in the exercise of its power to review such transactions.

How does the Philippine Competition Commission (PCC) deal with anti-competitive mergers and acquisitions?

The PCC is empowered by the Philippine Competition Act to review mergers and acquisitions in order to determine
if these will significantly reduce competition in the market, leading to higher prices, fewer choices, and lower quality of goods
and services.
 If PCC determines that a given merger or acquisition could substantially prevent, restrict, or lessen competition in
the market, it has the authority to prohibit, or impose conditions on mergers and acquisitions.

Do companies have to submit all merger or acquisition agreements for review and approval by the PCC?

Compulsory Notification

The PCA provides for compulsory notification by parties to the M&A agreement, subject to notification thresholds
for both size of transaction and size of person to be determined by the PCC.

● Size of transaction refers to the value of the assets or revenues of the acquired entity.
● Size of person refers to the value of assets or revenues of the ultimate parent entity (UPE), including entities it
controls, of at least one of the parties.

Under the Philippine Competition Act (PCA) and its Implementing Rules and Regulations, parties to an M&A
agreement in which the notification threshold is breached must notify the PCC before consummating the transaction.
In line with PCC Memorandum Circular No. 18-001 released in 2018, the thresholds for compulsory notification of M&As
will be adjusted annually based on the nominal gross domestic product (GDP) of the previous year. “Starting September
16, 2022, mergers and acquisitions that reach a Size of Party (SoP) of P6.1 billion and a Size of Transaction (SoT) of P2.5
billion will have to be notified to the PCC for mandatory merger review.” - PCC

Parties to the merger or acquisition agreement wherein the value of the transaction exceeds the thresholds 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. An agreement consummated in
violation of this requirement to notify the Commission shall be considered void and subject the parties to an administrative
fine of one percent (1%) to five percent (5%) of the value of the transaction.

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. 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

Effects of Notification

If within the relevant periods stipulated in the preceding section, the Commission determines that such agreement
is prohibited under Section 20 and does not qualify for exemption under Section 21 of this Chapter, the Commission may:

A. Prohibit the implementation of the agreement;

B. Prohibit the implementation of the agreement unless and until it is modified by changes specified by the
Commission.
C. Prohibit the implementation of the agreement unless and until the pertinent party or parties enter into legally
enforceable agreements specified by the Commission.

What are the exceptions to the prohibition of anti-competitive merger and acquisition?

M&A agreements which substantially prevent, restrict, or lessen competition may be allowed if the parties are able
to prove that

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 are likely to result from the merger or acquisition
agreement; or
B. a party is faced with actual or imminent financial failure and the agreement represents the least anti-
competitive arrangement among the known alternative uses of its assets.

What will the PCC do to an entity or entities found violating the PCA?

The PCC is empowered to impose fines and penalties on businesses whose conduct or activities violate the PCA,
those found to be in contempt, fail to comply with orders, or supply misleading or false information to the PCC.
FINES AND PENALTIES

A. Administrative fines for violations of Sections 14 (Anticompetitive Agreements), 15 (Abuse of Dominant Position), 17
(Compulsory Notification), and 20 (Prohibited Mergers and Acquisitions)

First offense: Fine of up to one hundred million pesos (P100,000,000.00);

Second offense: Fine of not less than one hundred million pesos (P100,000,000.00) but not more than two hundred
fifty million pesos (P250,000,000.00).

B. Failure to Comply with an Order of the Commission

a penalty of not less than fifty thousand pesos (P50,000.00) up to two million pesos (P2,000,000.00) for each
violation and a similar amount of penalty for each day thereafter until the said entity fully complies. Provided that
these fines shall only accrue daily beginning forty-five (45) days from the time that the said decision, order or ruling
was received.

C. Supply of Incorrect or Misleading Information.

fines of up to one million pesos (PI,000,000.00) where, intentionally or negligently, they supply incorrect or
misleading information

D. Any other violations not specifically penalized under the relevant provisions of this Act shall be penalized by a fine of not
less than fifty thousand pesos (P50,000.00) up to two million pesos (P2,000,000.00).

References:

Philippine Competition Commission. (2022). PCC provisionally sets thresholds for mandatory M&A notification: P6.1B for
Size of Party, P2.5B for Size of Transaction. Retrieved from: https://www.phcc.gov.ph/press-releases/pcc-new-
thresholds-2022/

Philippine Competition Commission. (2022). Philippine Competition Law (R.A. 10667). Retrieved from:
https://www.phcc.gov.ph/philippine-competition-law-r-10667/

Primer on the Philippine Competition Act. (n.d.). Retrieved from: https://www.phcc.gov.ph/wp-

content/uploads/2017/03/Primer-on-the-Philippine-Competition-Act.pdf