COMPETITION LAW AND POLICY A. 1. DEFINITION OF TERMS What is Competition Law?

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. 2. What is Competition Policy?

Competition policy, on the other hand, 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 practices. B. 3. GOALS/OBJECTIVES OF COMPETITION POLICY What are the Goals of Competition Policy? To promote economic efficiency, which comprises three (3) components

o Productive efficiency Firms use the least cost production techniques to produce maximum possible goods and services from given inputs o 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. To correct market failure To enhance consumer welfare To achieve higher economic growth To promote competitiveness in both and domestic and foreign market

4. Basic Market Structure in which the degree of competition affects prices, output and profits. These are: Perfect Competition - This is 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 - A 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 - One 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. C. 5. MARKET FAILURE What is market failure?

Occurs when the market is unable to achieve an efficient and equitable allocation of resources. 6. What are the sources of market failure? I. Public Goods a public good is one, which if provided to one consumer, is freely available to all consumers. Ex. - Street lighting, parks, roads, etc,. This means no private firm is able to make a profit from providing such goods. Therefore, government should ensure that such goods are provided at the socially desired level. II. Income Distribution The market will not necessarily ensure equitable distribution of incomes. This may motivate government to introduce policies to redistribute wealth through measures, i.e., income taxes and social security benefits. III. Monopoly The operations of monopoly or natural monopoly often result in misuse of market power and inefficient allocation of resources, which reduce community welfare. For this reason, governments generally

regulate monopoly and enforce laws preventing cartels. This type is a major rationale for a comprehensive competition policy. IV. Externalities An externality arises when an activity confers a benefit (like the benefit of education or immunization) or imposes a cost (pollution) on a third party, without the cost or benefit being included in the market price of that activity. V. Information Asymmetries In theory, buyers and sellers in a competitive market have complete knowledge about a product or service characteristics and quality. Information asymmetries between producers and consumers can lead to market failure and reduce community welfare. D. 7. COMPETITIVE CONDUCT RULES What are the competitive conduct rules?

Competitive Conduct - describes the decision-making processes of firms in a competitive market, where price, quantity and profit choices are dictated by overall market conditions and these are not unduly influenced by the actions of one or more large firms. In essence, competitive conduct describes firm behavior under conditions of perfect competition. Competitive Conduct Rules are governments response to the absence of perfect competition in a market. Their primary objective should be to protect or enhance the competitive process in markets where it is only partially operating. Competitive Process competitive conduct that reduce costs and prices, which is driven by impersonal and diffuse market forces and the threat of entry of additional suppliers. It results in efficient resource allocation and pricing, which can be attained in open, dynamic markets resembling perfect competition. Competitive conduct rules codify what is acceptable behavior in an economy. Typically, such rules prohibit arrangements that can be construed as anti-competitive, in that they either:

Increase the power of firms within a market to the extent that this inhibits competitive conduct; Prohibit existing competitors or potential market entrants from effectively competing. 8. What are anti-competitive agreements? Anti-Competitive Outcomes or Agreements The Hilmer Report (Hilmer 1993) identifies several market outcomes or agreements which can be viewed as anti-competitive. These are:

Horizontal Agreements agreement that exists 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 It 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.,) Misuse of Market Power This type of anti-competitive conduct occurs when a single firm in a dominant position in a market misuses its market power. EX: predatory pricing Mergers and acquisitions - Mergers and acquisitions can constitute inappropriate market behavior where they lead to market outcomes of the typed described above. It is unlikely that a move towards increasing market concentration will normally be viewed as favorably affecting competition. Potential solution to different types of anti-competitive conduct. These include:

Per se Prohibition Prohibition is the most direct form of anti-competitive measure that an authority can undertake. IT refers to those activities which are ambiguously detrimental to regular competitive behavior in a market (e.g., price fixing). Rule of Reason (Competition Test) A wide variety of business practices that while inhibiting competition, may not require total prohibition, The most widely used determinant in such a case is whether or not such activity reduces competition in the market. Authorization A mechanism through which the public benefit from ostensibly ant-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 authorize certain conduct where there is a perceived net benefit to the community from anti-competitive conduct. Notification involves the approval of certain types of anticompetitive conduct upon the offender being granted immunity, conditional on the consent of the market regulator. These type of arrangements rely on absolute openness and transparency. Examples of Anti-competitive Conduct

Price-fixing agreement competitors agree to fix prices at a particular level, use of less obvious devices such as recommended prices, in reality, fix prices by agreement. Market sharing agreements agreement among competitors to share a market. Ex: a number of producers may choose to restrict their sales to certain geographic areas, thus developing local monopolies. Exclusionary provisions agreements between competitors to limit dealings with a particular supplier or customer or a particular class of customer. Ex: primary boycotts, secondary boycotts. These actions are taken to prevent new firms from entering the market, or to force existing firms out of the market.

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 toper 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. o Tie-in arrangements and third line forcing when the supply of goods or services to a person is made provisional upon them also purchasing additional goods and services, either from the same supplier (tie in arrangement) or from another specified supplier (third line forcing) o Retail price maintenance refers to action by suppliers, manufacturers or wholesalers specifying a minimum price below which goods or services may not be resold or advertised for resale. E. 9. REGULATORY RESTRICTIONS ON COMPETITION What are regulatory restrictions? o Regulatory restrictions are governments own restrictions on competitive conduct, either through legislated regulation or direct ownership.

These restrictions can detract from overall competitiveness in the economy, in much the same way as market failure, in the sense that they detract from the regular workings of the market. Regulatory restrictions may entrench a smaller number of players in a less competitive environment. Consequences of these are higher prices, poorer quality goods and a group of firms that have a diminished response to their market.

Regulatory Restrictions Existing in the Philippines o o Regulatory barriers to market entry, including licensing and franchising agreements; Government monopolies, including monopolies on public utilities such as electricity generation and supply, telephone services and the shipping industry;

Rural marketing, especially restrictive marketing boards; and o 10. directly: Barriers to entry are burdens or limitations forcing any firm not presently operating in a market. They derive from; Other restrictions on competitive conduct.

Forms of Regulations that Impact on Competition There are two (2) forms of regulations that impact on competition

o Economies of scale due to market share achieved by the incumbents; o o o o o Capital requirements (including investment development through advertising and the like); in brand

Cost savings accruing to existing firms from their experience and familiarity with the particular industry Monopoly access to key infrastructure; Monopoly of key industry knowledge.

Regulations that restrict competitive behavior: Price control; and o Advertising restrictions

Impact of Regulation o o o Higher prices; Lower quality goods; and Less consumer choice as a result of reduced competition

In the case of monopolies, they can prevent any competition in the market F. 11. ESSENTIAL FACILITIESWhat is essential facility?

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

12.

Distinguishing feature: one facility can supply the entire market demand more clearly than two or more smaller facilities. Typically, natural monopolies have the following features: Large development and start-up costs Economies of scale: as the organization increases its output, the average cost per unit output declines

Natural monopolies are an outcome of the size of the market and the type of technology available to meet its demand. It is not a market structure, it is a cost minimizing method of production. There are two major implications: G. An industry may consist of more than one firm even though the existing technology would suggest that monopoly is more economically efficient. The existence of natural monopoly conditions in an industry may vary as demand varies and as the prevailing technology changes MAIN AREAS OF CONCERN OF COMPETITION LAW/POLICY What are the main areas/concerns which competition law/policy should address? Competition laws and policies are meant to address concerns that include:

a)

preventing enterprises from entering into agreements which do not have any beneficial features and which will restrict competition, either amongst themselves or between them and third parties; controlling attempts by monopolists or dominant firms from abusing their market position and preventing new firms from entering the market; competition is maintained in

b)

c) ensuring that workable oligopolistic industries; and

d) monitoring mergers between independent enterprises, where the effect of the merger may result in market concentration and reduction in competition. H. AGENCIES IMPLEMENTING COMPETITION POLICY

1. What are the agencies in the Philippines undertaking the implementation and enforcement of competition laws? Tariff Commission (TC) An attached agency of the National Economic and Development Authority (NEDA), it is mandated to assist the Cabinet Committee on Tariff and Related Matters (TRM) in the formulation of a national tariff policy and to monitor the implementation of the Tariff and Customs Code (TCC). Bureau of Import Services (BIS) A staff agency of the Department of Trade and Industry (DTI), it is mandated to monitor import quantities and prices of selected sensitive items (particularly liberalized goods) to anticipate surges of imports and assist domestic industries against unfair trade practices. Bureau of Trade Regulation and Consumer Protection (BTRCP) - Also a staff agency of the DTI, it is mandated to formulate and monitor the registration of business names and the licensing and accreditation of establishments; it also evaluates consumer complaints and product utility failures. Securities and Exchange Commission (SEC) An attached agency of the Department of Finance (DOF), it is mandated to administer corporate government laws such as the approval and registration of corporate consolidations, mergers and combinations. It also implements the Securities Act of 1982 which penalizes fraudulent acts in connection with the sale of securities (e.g. price manipulation, inside trading, short selling, etc).

Other agencies likewise enforce laws on anti-competitive behavior such as:

DTI and attached agencies including the Bureau of Foods and Drugs, Intellectual Property Office, and the Bureau of Product Standards for consumer welfare and protection. Philippine Economic Zone Authority for ecozone developers and ecozone-registered enterprises

Certain enforcement agencies are also industry-specific like: Bangko Sentral ng Pilipinas - for banks and financial institutions Insurance Commission - for insurance companies National Food Authority - for rice, corn, wheat and other grains and food stuff Sugar Regulatory Administration - for the sugar industry Philippine Coconut Authority - for the coconut industry Garments and Textile Export Board - for garment manufacturers and exporters Board of Investments - for pioneer/non-pioneer industries and those listed in the Investments Priorities Plan, availing of the incentives under the Omnibus Investments Code National Telecommunications Commission for telecommunications companies Land Transportation Franchising and Regulatory Board - for common carriers for land Civil Aeronautics Board - for companies engaged in air commerce Maritime Industry Authority - for the shipping industry Philippine Ports Authority - for port operators and arrastre services Department of Energy, Energy Regulatory Board, and the National Power Corporation - for power generation companies and oil companies

2.

What are the problems encountered in the enforcement of competition laws?

The following have been identified as some of the reasons behind the poor enforcement of competition laws: Despite the number of laws and their diverse nature, competition has neither been fully established in all sectors of the economy nor has existing competition been enhanced in other sectors. Since each law is meant to address specific situations, there runs the risk of one law negating the positive effects of another. There is no central enforcement agency. Enforcement is done by several individual agencies that do not operate in a coordinated manner and sometimes produce conflicting policies. Moreover, responsibility is too diffused and accountability for implementation of the laws is difficult to place. There is also a lack of expertise in the appreciation and implementation of competition laws.

 Fines imposable for breaches of the laws are minimal. Likewise, most punishments are penal in nature, hence, evidence requirements are substantial. There is a lack of jurisprudence and judicial experience in hearing competition cases. The SEC regards efficiency gains as more important than competition considerations in mergers and does not have a mandate to challenge mergers unless it can demonstrate they are against the public interest.

3.

Does the Philippines have a formal competition policy framework?

Although the Philippines has no explicit competition policy framework, the promotion of competition has been implicit in the major reforms implemented since the 1980s. Before the reforms, the Philippine economy was characterized by a highly restrictive policy, pervasive industry regulations, and other government intervention in various forms, e.g., protective policies, industry regulation and regulatory controls. 4. What has the government done to open up the market to competition? Since 1993, the government has demonstrated greater determination and better success in its program to open up the market to competition. It has implemented an economic reform agenda designed to strengthen the market structure through deregulation and economic liberalization. The major reforms implemented include, among others: 1. 2. 3. 4. 5. 6. 7. 8. substantial trade reforms which reduced the number of regulated items to a minimum and brought down tariff rates abolition of a number of regulatory bodies privatization demonopolization of the telecommunications industry some deregulation in the shipping and airline industries oil deregulation easing of entry of foreign banks easing the foreign equity limits, and resorting to a much less restrictive negative list of activities where foreign equity is limited the retail trade law.

I. 1.

BASIC PHILIPPINE LAWS DEALING WITH COMPETITION POLICY What are some of the basic laws dealing with competition?

The Philippine Constitution provides that 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. The most basic law addressing anti-competitive behavior is penal or criminal in nature. Article 186 of the Revised Penal Code defines and penalizes monopolies and combinations in restraint of trade and provides penalties therefor. The Civil Code of the Philippines (which came into effect in August 1950) and Republic Act No. 165 (otherwise known as the Act to Prohibit Monopolies and Combinations in Restraint of Trade) allow for the collection of damages arising from unfair competition. While the cited statutes mention or refer to competition, none of them actually defines the term. Special laws or statutes have also been enacted to specifically address some unfair trade practices. The Intellectual Property Code provides for the protection of patents, trademarks and copyrights. The Corporation Code of the Philippines provides for the rules regarding mergers and consolidations, and the acquisition of all or substantially all the assets or shares of stock of corporations. The Revised Securities Act which complements the Corporation Code proscribes the manipulation of security prices and insider trading. Another piece of important legislation is the Price Act which defines and identifies illegal acts of price manipulation such as hoarding, profiteering and cartels. Just as important is the Consumer Act of the Philippines which, among others, provides for consumer product quality and safety standards. 2. What should the government do to strengthen the economys competition regime? The government recognizes the need to enact a comprehensive competition policy framework in order to address the inadequacies of past legislations dealing with unfair trade measures. Identifying areas for change and improvement is a fundamental step in developing an effective competition regime. The following factors should be taken into consideration: Markets in the formulation of competition policy, both the domestic and international markets should be taken into consideration. Competing in the international market is largely dependent on how open, strong and integrated the domestic market is. Unfair trade practices and anti-competitive behavior in the domestic market may very well undermine, even nullify, gains from market opening initiatives. Measures Laws bearing on competition are numerous and varied. However, there remains a need to enact an overall law on competition, particularly a

comprehensive anti-trust legislation. There are several bills pending in Congress where some authors have suggested that competition law should: (a) focus on the actual and or potential business conduct of firms in a given market, and not on the absolute or relative size of firms. It should look at the business conduct of firms and the business environment in which the firms operate. (b) be effectively harmonized and linked with other government policies. Promoting competition in the business environment constrains anticompetitive behavior by firms and also inculcates sound business practices and ethics. (c) be a law of general application, addressing all sectors of the economy. Exemptions from its application may be allowed if they will not limit competition, are based on sound economic principles and are aimed at facilitating legitimate economic activity. (d) contain provisions explicitly prohibiting business practices that are clearly against economic efficiency and consumer welfare, such as price fixing, bid rigging, restriction of output and market shares, allocation of geographic markets and customers, which should be deemed illegal per se and subject to criminal law and severe penalties. (e) provide for a rule of reason approach with respect to horizontal and vertical mergers, specialization agreements, joint ventures, vertical manufacturing, wholesale and retail distribution arrangements. Prior notification to and approval by the concerned agency of such business arrangements are recommended but only with respect to the largest transactions, taking into consideration size thresholds in terms of market share, assets, sales and/or employment of parties involved. Maintenance - The effective implementation and enforcement of anti-competition laws should be vested in a centralized agency with sufficient powers to oversee and monitor the competitive climate in the different sectors of the economy, to formulate and recommend such measures as would ensure the maintenance of competition in the Philippine domestic market and as would anticipate developments in the international market. Message - Finally, a competition policy can only be effective if the people believe in it. This is best ensured by allowing the people to participate in making the decision. Consultations and consensus building, therefore, are prerequisites to the adoption of such policy. It is also important to consult the public because much of the anti-competitive behavior in the market may be attributed to them. To ensure appropriateness and acceptability of proposed measures as well as easier implementation and observance by the public, dissemination, awareness, education and information campaigns should be undertaken through mass media.

3. What are the difficulties encountered in enacting a National Competition Law and creating Central Competition Authority? A number of underlying issues exist which hinder the development of a workable competition policy. These issues include: Lack of Understanding and Education on the Rationale and Positive Implications of a Competition Policy Despite the introduction of pro-competitive reforms in the economy, competition culture has yet to be ingrained in the psyche of the Filipino people (business community, consumers, government officials, legislature) especially in these times of global economic slow down. Lack of Political Will Certain influential members of Congress are themselves corporate owners/majority stockholders of dominant firms who are threatened by the enactment of a comprehensive competition policy/law. They would resist the passage of a competition bill. Lack of Technical Expertise and Experience The competition authority should have very competent and knowledgeable manpower to define markets, identify anticompetitive actions, and judiciously construct and administer competition tests on issues of concentration, agreements, mergers and acquisitions. The question is, what would be the best way of developing such expertise and institutions? Lack of Agreement on How to Establish a Single Central Competition Authority One approach is to do this gradually, possibly on a piecemeal basis. The creation of a coordinating body to administer an austere law would be a good start. Another approach is to transform an existing body which is performing some of the functions of competition policy. A third approach would be to create a new central body which could be designed to develop and evolve into what it should ideally become. Current Lack of Experience and Knowledge in Competition Policy Matters in the Judiciary If this is not addressed, then the new law will remain unenforced (as existing legislation is) or worse, enforcement will be inappropriate, creating potential economic inefficiencies. The issue in respect to insufficient knowledge and experience is clear: It is one thing to know that a firm in a position to control the relevant market for a particular good or service is not permitted to limit production for the purpose of raising prices, and another to prove that the firm in question has control of a market and that it is reducing production to raise prices. Still another thing is adjudicating a case where such accusations are made. Continuing Resistance to Globalization by Certain Sectors Who Feel Threatened by Liberalization and International Trade Commitments

Domestic industries allege that they are suffering injury or the threat thereof because of import surge resulting from the governments unilateral tariff reduction program and/or tariff commitments in ASEAN and WTO. J. THE WAY FORWARD

Sustained advocacy and public information campaign on the culture of fair competition Drafting of a competition policy bill incorporating international best practices including competitive neutrality, legislative review and access regimes Act of Congress Competition authority as a constitutional body Multilateral/Regional/Bilateral Agreement on Competition Policy

COMPETITION POLICY Republic of the Philippines EXISTING COMPETITION LAWS Philippine Constitution (1987)- The Philippine Constitution of 1987 prohibits anticompetitive practices. Monopolies are not prohibited "per se", but only when public interest so requires. It also prohibits combinations in restraint of trade or unfair competition. However, the 1987 Constitution provides no imposable sanctions for violations of these provisions. Article 186 of the Revised Penal Code R.A. 3815 (1930)- Similar to Section 2 of the Sherman Act (1890) which was the major legislation that ushered competition law into the limelight in the U.S. It describes the acts punishable, such as monopolies and combinations in restraints of trade, and

the penalties imposable on such. Republic Act 3247 (An Act to Prohibit Monopolies and Combinations in Restraint of Trade) (1961) provides for recovery of treble damages for civil liability arising from anti-competitive behavior. Republic Act 165 (1947) (Patent Law) and Republic Act 166 (1971) (Trademark Law) describes the appropriate civil action which can be resorted to, and the penalties imposable. Presidential Decree 49 (1972) (Copyright Law) penalizes copyright infringement. Republic Act 8293 (1997) An Act prescribing the Intellectual Property Code and establishing the Intellectual Property Office Republic Act 386 (1949) (Civil Code of the Philippines) stipulates the collection of damages arising from unfair competition. Republic Act 7581 (1991) (The Price Act) protects the consumers by stipulating price manipulation (hoarding, profiteering and cartels) as illegal acts. Republic Act 7394 (1932) (The Consumer Act of the Philippines) imposes penalties for such behavior as deceptive, unfair and unconscionable sales practices in both goods and credit transactions. The Philippine Corporation Code Batas Pambansa Blg. 68 (1980) provides for rules and procedures to approve all combinations, mergers and consolidations. Revised Securities Act, Batas Pambansa Blg. 178 (1982) Republic Act No. 337 regulates Banks and Banking Institutions and for other purposes (General Banking Act) (1948) In recent years, there were already a number of laws passed by Congress and various Executive Orders signed by the President to strengthen the Competition policy framework. 1. Trade and Investment Liberalization To liberalize trade and in compliance with international

commitments, tariffs on numerous industrial and agricultural products have been reduced and/or modified through various executive orders. These are the following: Republic Act No. 8178 (1996) - An Act Replacing Quantitative Import Restrictions on Agricultural Products, Except Rice, with Tariffs, Creating the Agricultural Competitiveness Enhancement Fund, and for other Purpose. Republic Act 7650 (1993) - An Act Repealing Section 1404 and amending Sections 1401 and 1403 of the Tariff and Customs Code of the Philippines, as amended, relative to the Physical Examination of Imported Articles. Republic Act 8181 (1996) to shift the basis for the computation of duties from home consumption value to transaction value to address some of the leakages in collections. Republic Act 7843 (1994) also known as the AntiDumping Act of 1994, was enacted to rationalize and strengthen the provisions on antidumping in the Tariff and Customs Code. Executive Order No. 264: (1995) Modifying the Nomenclature and the Rates of Import Duty on Certain Imported Articles under Section 104 of the Tariff and Customs Code of 1978 (Presidential Decree No. 1464) as amended. Executive Order No. 287: (1995) Modifying the Rates of Duty on Certain Imported Articles as Provided for under the Tariff and Customs Code of 1978, as amended, in Order to Implement the 1996 Philippine Schedule of Tariff Reduction under the New Time Frame of the Accelerated Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade Area (AFTA). Executive Order No. 288: (1995) Modifying the Nomenclature and the Rates of Import Duty on

Certain Imported Articles under Section 104 of the Tariff and Customs Code of 1978 (Presidential Decree No. 1464), as amended. Executive Order No. 313: (1996) Modifying the Nomenclature and the Rates of Import Duty on Certain Imported Articles under Section 104 of the Tariff and Customs Code of 1978 (Presidential Decree No. 1464), as amended Executive Order No. 328: (1996) Modifying the Nomenclature and the Rates of Import Duty on Certain Imported Articles under Section 104 of the Tariff and Customs Code of 1978 (Presidential Decree No. 1464), as amended. Executive Order No. 365: (1996) Modifying the Nomenclature and the Rates of Import Duties on Certain Imported Articles under Republic Act Nos. 8180 and 8184. Executive Order No. 388: (1996) Modifying the Nomenclature and the Rates of Import Duties on Certain Imported Articles under Section 104 of the Tariff and Customs Code, as amended. Executive Order No. 390: Modifying the Nomenclature and the Rates of Import Duties on Certain Imported Articles under Section 104 of the TCC of 1978 (P.D. No. 1464) as amended. Public Utilities a. Maritime Industry Executive Order No. 185 (1994) was adopted to foster competition through more liberalized rules on the entry of new operators for existing routes, the deregulation of the entry of newly-acquired vessels into routes already served by franchised operators, and vessel rerouting or amendment of authorized route and change in sailing schedules and frequency. Executive Order No. 213 (1994) provides for the deregulation of domestic shipping rates in the following areas: a) first and

second class passage rate for passenger-carrying domestic vessels, b) passage rates for vessels catering to tourism as certified by the Department of Tourism or those serving DOT-certified tourist priority links/areas, c) freight rates for all commodities classified as Class "A" and "B" and "C", except for non-containerized basic commodities, and where the route/link is still being serviced by only one operator. b. Civil Aviation Executive Order No. 219 (1995), international civil aviation was sought to be liberalized through the designation of at least two official carriers for the Philippines, and the possibility of designating other carriers as official carriers when the total frequency requirements of the Philippines under its various Air Services Agreement cannot be fully serviced by the first two designated official carriers. c. Port Services Executive Order No. 212 (1994) - In order to accelerate the demonopolization and privatization program for government ports. Competition is encouraged in the provision of cargo handling and other port services. Under the government's demonopolization program, ship owners, operators, charterers or other users have the option to contract or engage the services of the Philippine Port Authority (PPA) authorized handler or port service contractor of their choice. d. Telecommunications The most successful efforts expended in breaking up monopolies and cartels were undertaken in the telecommunications industry. Executive Order No. 59 (1993) required mandatory interconnection for other telecommunications firms with the Philippine Long Distance Telephone Company (PLDT) backbone. Executive Order No. 109 (1993) laid down the government's policy to improve the Local Exchange Carrier Service. Authorized international gateway operators were required to provide local exchange service in served and unserved areas, including Metro Manila, within three years from the grant of authority from the National Telecommunication Commission. Republic Act NO. 7925 (1995), entitled "An

Act to Promote and Govern the Development of Philippine Telecommunications and the Delivery of Public Telecommunications Services" was enacted to provide a comprehensive guideline regulating the public telecommunications industry in the Philippines. e. Energy Executive Order No. 215 (1987) was issued to promote private sector participation in the business of generating electricity. Republic Act No. 8180 (1996), which provides for the deregulation of the oil industry, was also recently enacted. Executive Order No. 377, Providing the Institutional Framework for the Administration of the Deregulated Local Downstream Oil Industry, Series of 1996 f. Water Executive Order No. 311 (1996) was issued to encourage private sector participation in the operation and facilities of the MWSS. g. Privatization of State Enterprises Executive Order No. 298 (1996) - issued by the President to provide for alternative and/or intermediate modes of privatization through joint ventures, B-O-T schemes, management contracts, lease purchase arrangements and securitization. h. Taxation, Monetary and Fiscal Reforms Republic Act No. 7660 - rationalization of the documentary tax system. Republic Act No. 7717 - the imposition of taxes for sale of shares of stock through the stock exchange or through initial public offerings. Republic Act No. 7716 - Expanded Value-Added Tax. Republic Act No. 7642 was also enacted to increase the penalties for tax evasion and violation of the provisions of the National Internal Revenue Code. Still pending deliberations in Congress is the Comprehensive Tax Reform Package endorsed by the Ramos Administration. Under Central Bank Circular No. 1389 (Consolidated Foreign Exchange Rules and Regulations), as amended, foreign exchange restrictions were lifted thereby allowing the market to freely trade in foreign currencies. Republic Act No. 8183 was passed expressly repealing the Uniform Currency Law (Republic Act No. 529) which restricted

parties to a contract to deal only in Philippine Peso in order to settle monetary obligations. MEMORANDUM COMPETITION LAW IN THE PHILIPPINES ________________________________________________________________________ To date, the Philippines do not have a comprehensive and developed legislation relating to anti-trust and monopoly activities. pending However, there are several anti-trust bills

before the Twelfth Philippine Congress. They are as follows: 1. Senate Bill (S.B.) No. 175 - An Act creating the Fair Trade Commission, prescribing its powers and functions in regulating trade competition, and monopolies and for other purposes; 2. S.B. No. 1361 - An Act providing for more effective implementation of the Constitutional mandate against monopolies, combination and restraint of trade and unfair competition by redefining and strengthening existing laws, processes and structure regulating the same, and for other purposes; 3. S.B. No. 1600 - An Act prohibiting monopolies, attempt to monopolize industry or line of commerce, manipulation of prices of commodities, asset acquisition and interlocking membership in the board of directors of competing corporate bodies and price discrimination among customers, providing penalties therefore, and for other purposes; 4. House Bill (H.B.) 1906 - An Act declaring unfair trade practices as acts of economic sabotage. HB 1906 declares the following acts as economic sabotage and provides criminal sanctions for the same: (i) smuggling; (ii) technical smuggling; (iii) misclassification of importation; (iv) dumping, and (v) other forms of unfair trade practices.

5. H.B. No. 198 - An Act creating a special body that shall regulate and exercise authority over monopolistic practices, combination in restraint of trade and unfair competition and appropriating funds therefore; and 6. H.B. No. 2439 - An Act penalizing unfair trade practices and combinations in restraint of trade, creating the Fair Trade Commission, appropriating funds therefore, and for other purposes. The most significant of these bills is S.B. No. 175, proposing the passage of the Fair Trade Act or an Act Creating the Fair Trade Commission, Prescribing Its Powers and Functions in Regulating Trade Competition and Monopolies and For Other Purposes. This bill consolidates all anti-trust laws into one law and establishes a Fair Trade Commission (Commission), an executive body that will enforce the Fair Trade Act. Generally, the bill seeks to prohibit monopolies and cartels and other practices which diminish, impair or prevent competition and free trade. It defines absolute monopolies, relative monopolies and trusts which may constitute prima facie violations of the law. A trust is defined as a merger, acquisition of control or any act whereby companies, partnerships, shares, equity, trusts or assets are concentrated among competitors, suppliers, customers or any other business entity. Under enumerated circumstances, the bill, if passed into law would require prior notification to the Commission before trusts are formed. There are also laws of general application that are relevant to the regulation of antitrust and monopoly activities. The Philippine Constitution outlines the state policy of regulating or prohibiting monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition are to be allowed. In relation to this policy, the Revised Penal Code of the Philippines penalizes parties

entering into any contract or agreement or taking part in any conspiracy or combination in the form of a trust or otherwise, in restraint of trade or commerce, as well as penalizes those who prevent, by artificial means, free competition in the market. It also imposes penalties on parties who monopolize any merchandise or object of trade or commerce, or who combine with any other persons to monopolize said merchandise or object in order to alter the prices thereof or who spread false rumors or make use of any other artifice to restrain free competition in the market. The Civil Code allows the recovery of damages in cases of unfair competition in agricultural, commercial or industrial enterprises. There are also other laws on unfair competition pertaining to the protection of intellectual property rights.

President Aquinos Most Evil Proposal: Antitrust Law

AUGUST 7, 2010 tags: anti-competition laws, antitrust law, Capitalism,COMPETITION, FREEMARKET, JUAN PONCE ENRILE, NOYNOY Aquino, philippine economy, Senate bill 123 Theres a legislative proposal that will make successful businessmen in this country criminals: Antitrust Law! Say no to this non-objective law! The Aquino administration is now preparing for the implementation of an antitrust law in the Philippines in order to legislate private corporations and companies monopolistic tendencies. The President said in his first State of the Nation Address (SONA) that it is the governments duty to ensure that the market is fair for all - and, to fulfill his statist duty as the highest elected official of the land, he believes that he has to put an end to monopolies or cartels in the country. Thus, he said that the country needs an antitrust law that will give life to these principles, to afford Small - and Medium-Scale Enterprises the opportunity to participate in the growth of our economy.

Does the economist President know what hes talking about? The Philippine Senate already has its proposed Antitrust Act (Senate Bill 123) entitled, An Act Prohibiting Monopolies, Attempt to Monopolize an Industry or Line of Commerce, Manipulation of Prices of Commodities, Asset Acquisition and Interlocking Memberships in the Board of Directors of Competing Corporate Bodies and Price Discrimination Among Customers, Providing Penalties Therefor, and for other Purposes. However, what is clear is that the Senate proposal authored by Senator Juan Ponce Enrile is simply a rip-off- or a plagiarized copy- of three United States laws, which are the basis of the proposed anti-trust and unfair competition laws: the Sherman Act (15 USC 1-7), the Clayton Act of 1914, and the Robinson-Patman Act of 1936 (15 USC 13). Sen. Enrile wrote the following in the bills Explanatory Note: Our people have been victims to big business. It behooves the Senate to provide protection to our people against price manipulators. In a volatile economic situation such as that which we are experiencing now, it is not very difficult to imagine how artificial prices in oae or two commodities is able to directly or indirectly raise the prices of related goods and services. In Article XII, Sectioii 19, our Constitution provides: Section 19. The State shall regulate or prohibit, monopolies when the public interest so requires. No combinations, in restraint of trade or unfair competition shall be allowed. As proof of the importance of this Constitutional mandate, Section 22 of the same article encourages the promulgation of legislation that would impose civil and criminal sanctions against those who circumvent or negate this principle. Hence, Section 22 of the Constitution provides: Section 22. Acts which circumvent or negate any of the provisions of this Article shall be considered inimical to the national interest and subject to criminal and civil sanctions, as may be provided by law. Although previous legislations have been passed pursuant to this Constitutional mandate, the increased deviousness and complexity of schemes in perpetuating monopolies in the free market landscape necessitates an equally sophisticated legislation that would efectively address this concern. Generally, this bill penalizes combinations or conspiracies in restraint of trade and

all forms of artificial machinations that will injure, destroy or prevent free market competition. For these reasons, the passage of this hill is earnestly recommended. It is very interesting to note that Sen. Enrile is a big business owner himself. In fact, it was declared that the good senator has business interests in over 40 companies and corporations located in Makati area alone as of 2004. So in the name of the people and of public interest, there is a need to legislate corporate success, according to this explanatory note of Sen. Enrile. By personally proposing such an antitrust bill, will he benefit from the enactment of this antitrust proposal in the Philippines? The problem with this antitrust proposal, which was imported from the United States, is that it is a non-objective law. Under this law, a business-owner is already condemned as a criminal from the moment he starts his own business, regardless of his line of business or corporate practice. According to this law, a business-owner can be held liable for monopoly or for a mere attempt to monopolize, to comb ine or conspire, expressly or impliedly, with any other person or persons, to monopolize any part of the trade of commerce within the country, among others. If evaluated very carefully, there is only one distinction in the legal treatment given to a businessman or to a criminal: the rights of the criminal are protected much more objectively than the businessmans. The crimes that can be committed by any business-owner, corporation, partnership, or association are provided under Sections 3 to 10 of SB 123. As stated by Sen. Enriles Explanatory Note, the alleged intent of his antitrust proposal is to protect competition in the business sector. However, such an expressed intent is founded on the statist or socialistic delusion that an unhindered, unregulated market will necessarily lead to the creation of coercive cartels or monopolies. What Sen. Enrile and his cohorts failed to understand is that no unjust cartel or monopoly has even been and can ever be created or established by means of free trade on a free-market economy. Both American and Philippine history tells us that all economic crisis and coercive cartel or monopoly was caused by government interference with the economy by means of special privileges, such as subsidies or franchises, and by means of legislative action. In the Philippines, we have the Independent Power Producers (IPP) that hold a seemingly perpetual monopoly on the countrys power sector because of a franchise or a privilege given to them by the government. Those who are advocating or proposing for the passage of this evil bill are either stupid or have vested economic interest. This bill, once enacted, may be used by incompetent businesses against their highly competent competitors. It can also be used by some of

our elected politicians and public officials like Sen. Enrile who have business interests for personal economic benefits. It is now the moral obligation of all business owners and all competent and successful companies and corporations in the country to oppose this evil bill. It is true that the 1987 Constitution permits the enactment of such a law simply because our charter is a mixture of Republicanism and socialism. The Constitutional provisions (under Article XII) cited by Sen. Enrile in his Explanatory Note simply expose the dictatorial and socialistic tendencies of the fundamental law of the land. Since we have a Constitution possessed by socialism or statism, the best thing that the concerned businesses, big or small, can do is to fight this bill by exposing its evils and flaws and how it affects the country as a whole. Again, since this bill was plagiarized by Sen. Enrile from at least three notiorious American laws, we can fight it by citing the evils of the American antitrust and anticompetition laws. Here are some of the evils of an anti-trust law, according to Raymond Niles, who wrote an article entitled The Case Against Capitalism. Antitrust punishes the best companies The list of antitrust targets reads like a Whos Who of American business success stories. Standard Oil Company, Alcoa Aluminum Company, IBM, and Microsoft, are just a few. These companies were pioneers in developing new and beneficial products. Who doesnt benefit from cheaper gasoline using methods pioneered by Rockefeller, the aluminum foil and light-weight aluminum parts invented by Alcoa, or the computer revolution, first in mainframes by IBM, and then in personal computing by Microsoft? These companies pioneered new industries and offered new products that were widely demanded by customers. The huge demand for their products and their large marketshare was a sign of how successful these companies were in selling products that many people wanted. Yet, that market share became the basis for antitrust lawsuits. Antitrust is used by unscrupulous companies against their competitors An honest businessman competes by selling a better product. It is not a coincidence that it is usually second and third-tier companies who use antitrust to hammer a more successful competitor. What does it say about the competitive spirit of a company that must cry to mother (i.e., the Federal Trade Commis sion) when the competition gets too tough? Antitrust is used by less successful businessmen to stifle competition.

Antitrust is arbitrary and non-objective; it is bad law A good law is easy to understand and apply, so that one clearly knows in advance what is a crime and what is not a crime. Antitrust laws make it impossible to know whether one is committing a crime. Under antitrust, it can be illegal to charge less than your competitor (that is considered price gouging or dumping), to charge the same price as a competitor (that could be collusion or oligarchy), or to charge a higher price than your competitor (that could be monopolistic behavior or destroying consumer surplus). Thousands of lawyers and regulators extract hundreds of millions of dollars out of the economy wrestling with these questions. No one should be subject to such arbitrary law. Capitalism doesnt need antitrust The great successes in business were achieved by companies that began small, and became large through innovation and lower prices. Antitrust did not make those successes happen. On the contrary, antitrust is poised like a guillotine at the throats of every businessman who has the foresight, perseverance and pluck to become successful. His very success, his large market share, puts a target on his back for unscrupulous competitors and eager bureaucrats.

No to Kuya Noys Anti-Trust Law

JULY 29, 2010 tags: ANTI-TRUST LAW, Benigno Noynoy III, Capitalism,COMPETITION, competition laws, MONOPOLY, sherman act No to Anti-Trust law! Anti-trust law is one of the most non-objective laws in the United States. But since we have this habit of borrowing even the bad legal doctrines, principles, and legal concepts from other countries, the United States in particular, the new administration promised to implement an anti-trust law in the Philippines. In his first State of the Nation Address (SONA), President Noynoy Aquino vowed to ensure that the market is fair for all. Thus, he said: According to our Constitution, it is the governments duty to ensure that the market is fair for all. No monopolies, no cartels that kill competition. We need an Anti-Trust Law that will give life to these principles, to afford Small- and Medium-Scale Enterprises the opportunity to participate in the growth of our economy. Aquino

Now the Senate came up with its proposed anti-trust act (Senate Bill 123) entitled An Act Prohibiting Monopolies, Attempt to Monopolize an Industry or Line of Commerce, Manipulation of Prices of Commodities, Asset Acquisition and Interlocking Memberships in the Board of Directors of Competing Corporate Bodies and Price Discrimination Among Customers, Providing Penalties Therefor, and for other Purposes. The main proponent of the act, Senator Juan Ponce Enrile said: The enactment of the bill would prevent abuses, such as those perpetrated by Meralco, including overcharging of customers, price manipulations, ghost deliveries, book manipulations and charging of system losses to customers, amounting to billons of pesos, and others. Prohibiting price fixing is just one aspect of the proposed antitrust legislation. Broadly speaking,competition laws seek to either regulate or outlaw the following acts:

Prohibiting agreements or practices that restrict free trading and competition between business entities. This includes in particular the repression of cartels; Banning abusive behaviour by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position. Practices controlled in this way may include predatory pricing, tying, price gouging, refusal to deal and many others, and; Supervising the mergers and acquisitions of large corporations, including some joint ventures. Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to remedies such as an obligation to divest part of the merged business or to offer licences or access to facilities to enable other businesses to continue competing. Its good that Sen. Enrile revealed that the Senate proposal is merely a rip -off of the three United States laws, which are the basis of the proposed anti-trust and unfair competition laws: theSherman Act (15 USC 1-7), the Clayton Act of 1914, and the Robinson-Patman Act of 1936 (15 USC 13). This means that it is simply OK to criticize the proposed bill based on the substantial body of work either expressed in scholarly works, jurisprudence, legal commentaries, among others. However, an anti-trust legislation must be opposed on the ground that it is antiinnovation and anti-business. I dont have the time yet to deal with this issue so let me point out the basis why an anti-trust law must be rejected.

To quote philosopher Ayn Rand writing in Choose Your Issues, The Objectivist Newsletter: The Antitrust lawsan unenforceable, uncompliable, unjudicable mess of contradictionshave for decades kept American businessmen under a silent, growing reign of terror. Yet these laws were created and, to this day, are upheld by the conservatives, as a grim monument to their lack of political philosophy, of economic knowledge and of any concern with principles. Under the Antitrust laws, a man becomes a criminal from the moment he goes into business, no matter what he does. For instance, if he charges prices which some bureaucrats judge as too high, he can be prosecuted for monopoly or for a successful intent to monopolize; if he charges prices lower than those of his competitors, he can be prosecuted for unfair competition or restraint of trade; and if he charges the same prices as his competitors, he can be prosecuted for collusion or conspiracy. There is only one difference in the legal treatment accorded to a criminal or to a businessman: the criminals rights are protected much more securely and objectively than the businessmans. She also states in Antitrust: The Rule of Unreason, The Objectivist Newsletter: The alleged purpose of the Antitrust laws was to protect competition; that purpose was based on the socialistic fallacy that a free, unregulated market will inevitably lead to the establishment of coercive monopolies. But, in fact, no coercive monopoly has ever been or ever can be established by means of free trade on a free market. Every coercive monopoly was created by government intervention into the economy: by special privileges, such as franchises or subsidies, which closed the entry of competitors into a given field, by legislative action. (For a full demonstration of this fact, I refer you to the works of the best economists.) The Antitrust laws were the classic example of a moral inversion prevalent in the history of capitalism: an example of the victims, the businessmen, taking the blame for the evils caused by the government, and the government using its own guilt as a justification for acquiring wider powers, on the pretext of correcting the evils. Free competition enforced by law is a grotesque contradiction in terms. Business people in this country must understand the perils or evils behind this nonobjective proposed legislation.

A CRITIQUE OF PHILIPPINE ANTI-TRUST LAWS

Atty. Lorna Patajo-Kapunan was a resource speaker at the second "Understanding Anti-Trust" Public Forum held at the Philippine Senate last February 10, 2011. Atty.

Kapunan gave a detailed and very informative talk on previous and existing anti-trust laws in the Philippines, the issues surrounding what she described as these "scattered" provisions, and the need for a comprehensive anti-trust framework. A brief outline of Atty. Kapunan's presentation during the public forum appears below:

A Critique of Philippine Anti-Trust Laws by Atty. Lorna Patajo-Kapunan Senior Partner Kapunan Lotilla Garcia & Castillo Law Offices

Various Existing Anti-Trust Laws in the Philippines

THE PHILIPPINE CONSTITUTION, Article XII, Section 19 The Revised Penal Code of the Philippines, Article 186 The New Civil Code of the Philippines, Article 28 Republic Act No. 7394, the "Consumer Act of the Philippines" Republic Act No. 7581, the "Price Act" The Corporation Code of the Philippines, Section 79 The Intellectual Property Code of the Philippines Republic Act No. 8479, the "Downstream Oil Industry Deregulation Act of 1998" Republic Act No. 7042, the "Foreign Investments Act of 1991" Republic Act No. 8762, the "retail Trade Liberalization Act of 2000"

Problems of the Current Anti-Trust Laws

All laws relating to anti-trust are scattered in different codes. Existing anti-trust laws do not provide for clear-cut guidelines, elements/requisites or evidence to determine whether an act constitutes unfair competition, monopolistic behavior or restraint of trade. Lack of judicial experience in determining anti-trust laws, caused also by inadequate laws. Need for proper body to determine whether there was any violation of anti-trust laws.

"In the case of SEDI and FDI 2 vs. Nestle Philippines, Inc., the DTI refused to assume jurisdiction over an administrative complaint for violating Article 186 of the Revised Penal Code, which is a trade and industry law. DTI itself is confused with its

jurisdiction when it ruled that the proper office to assume jurisdiction is the DOJ because Article 186 of the Revised Penal Code is a penal law."

Codification of anti-trust laws into one statute. Recognition of the rise of Small and Medium Filipino Enterprises (SME) and the need for protection. Clearer protection against vertical agreements which have the effect of restraining trade. Definition of vertical price restraints and predatory pricing. Recognition of the disadvantage of vertical price restraint to the distributor or retailer. Recognition that protection from vertical price restraint is not a novel concept as other countries have protected against such form of anti-trust practice.

Proposed Bills

Senate Senate Senate Senate

Bill Bill Bill Bill

No. No. No. No.

1 (Senator Juan Ponce Enrile) 123 (Senator Sergio R. Osmena III) 175 (Senator Antonio "Sonny" F. Trillanes IV) 1838 (Senator Miriam Defensor Santiago)

Key Features of the Law Prohibition against anticompetitive mergers Merger regime suspensive Prohibition of collusive agreements Leniency policy Prohibition applying to vertical conduct Prohibition against unilateral conduct Criminal sanctions Private rights

(if threshold met)

(eg abuse dominance)

of

Competition in Philippines - Market Overview

Anti-trust has long been part of the Philippine legal system starting with Articles 543 to 545 of the Old Penal Code then enforced by the Spanish regime. During the American occupation, in 1917, the Philippine Legislature enacted Act No. 3247 entitled An Act to Prohibit Monopolies and Combinations in Restraint of Trade understandably based on the Sherman Act of the United States. Upon Philippine independence in 1935, however, Act No. 3247 was repealed by the Revised Penal Code

which reverted to providing penalties for machinations, monopolies and combinations but deleting treble damages. Despite the early start and the fact that the 1987 Philippine Constitution has reaffirmed the States mandate to regulate or prohibit monopolies, combinations in restraint of trade and other unfair competition practices, for the sake of public interest, there is presently no comprehensive competition law in the Philippines. What it does have are several anti-trust legal provisions, ranging from the general to very specific ones, scattered among various unrelated sector-specific statutes. As mentioned, the Revised Penal Code treats as criminal certain acts deemed to be monopolistic or in restraint of trade such as: 1. entering into any contract or taking part in a combination in restraint of trade or commerce to prevent by artificial means free competition in the market; 2. monopolizing any merchandise to alter the price by spreading false rumors or making use of any other article to restrain free competition in the market; and 3. making transactions prejudicial to lawful commerce or increasing the market price of any merchandise. The more recent Price Act patterned after the Clayton Act of the United States, also penalizes price manipulation in three forms namely: 1. hoarding or the undue accumulation of prime commodities beyond normal inventory levels; 2. profiteering or selling at a price grossly in excess of the goods true worth; and 3. cartel or combining to artificially and unreasonably manipulate prices. There is prima facie existence of a cartel whenever two or more persons or businesses in competition perform uniform, complementary or simultaneous acts to bring about artificial prices. The Intellectual Property Code likewise imposes criminal penalties on acts of infringement of a registered mark and unfair competition. Examples of unfair competition are selling goods which have been given the general appearance of the goods of another as to deceive the public and defraud the legitimate owner; making false statements or acting in bad faith to discredit the goods of another; or inducing the false belief that one is offering the services of another. On the other hand, the Civil Code of the Philippines of 1950 allows, in general terms, the recovery of damages arising from unfair competition in agricultural, commercial or industrial enterprises or in labor. Note, however, that for the offending party to be liable for damages, he should have acted through the use of force, intimidation, deceit, machination, or any other unjust, oppressive or highhanded method subject to proof of clear and convincing evidence. More specific provisions dealing with competition are those found in the Electric Power Industry Reform Act of 2001 which provides for de-monopolization and shareholding dispersal in distribution utility and holding companies. Thus, holdings of persons

shall not exceed 25% of voting shares of stock unless the utility or holding company or controlling stockholders are already publicly listed. Additionally, no participant in the electricity industry may engage in any anti-competitive behavior such as crosssubsidization, price or market manipulation, or other unfair trade practices detrimental to the encouragement and protection of contestable markets. The Energy Regulatory Commission (ERC) is tasked to enforce safeguards against anyone owning, operating or controlling more than 30% of the installed generating capacity of a grid, or 25% of the national installed generating capacity and to monitor and penalize any market power abuse or anti-competitive or discriminatory act or behavior in the electric power industry. The ERC has the power to impose price controls, issue injunctions, requirement divestment or disgorgement of excess profits and impose fines and penalties. Similarly, the Downstream Oil Industry Deregulation Act of 1998, ensures fair competition and prevents cartels and monopolies by providing penalties for persons engaged in any act to fix prices, restrict outputs or divide markets, or are into predatory pricing. As could be seen, except perhaps for the ERC in the case of the electric power industry, the prosecution of persons engaged in anti-trust or unfair competition behavior as well as recovery of civil damages arising there from is the primary responsibility of the private offended party. While the Department of Justice supervises the prosecutorial service for all criminal complaints in the country, it does not function like a trade board or commission dedicated to the enforcement of anti-competition legal provisions. Apart from this lack of specialized implementation and the absence of a cross-sector or comprehensive law against monopoly, there is also a dearth of jurisprudence on the matter. So far, the most important one is where the Philippine Supreme Court had denied a petition to declare null and void the amended by-laws of a big manufacturing company which would disqualify any stockholder from being nominated to its board of directors when he is engaged in a competing business. The Supreme Court held that a monopoly can be achieved through the suppression of competition by the unification of interest or management, or it may be thru agreement and concert of action. It further said that when a competitor, has access to the pricing policy and cost conditions of the products of the company, the essence of competition in a free market for the purpose of serving the lowest priced goods to the consuming public would be frustrated. In another case, the Supreme Court determined that an exclusivity clause which prohibited the sales personnel of a direct selling enterprise from carrying or selling its competitors products, was not per se void and only that whose probable effect was to foreclose competition within a substantial share of commerce can be considered void for being against public policy. No less than the Supreme Court has said that there is a need to recast our laws on trust, monopolies, oligopolies, cartels and combinations injurious to public welfare to restore competition where it has disappeared and to preserve it where it still exists. For the past 20 years, Philippine lawmakers have attempted to pass bills to either strengthen existing legal provisions on anti-trust or come out with a comprehensive anti-competition legislation like those of their Asian counterparts. Minimise

Competition Philippines

Policy

in

The Philippines has a wide range of laws and statutes that deal with the various aspects of competition law such as monopolies and combinations in restraint of trade, restrictive business practices, price control measures and consumer protection. In fact, the concept of anti-trust regulation or competition policy is not new to the Philippines. Old anti-trust provisions of US laws (e.g., Sherman and Clayton Acts) found their way into the Philippines Constitution, the Revised Penal Code and the Civil Code. The Philippines Constitution prohibits and regulates monopolies, combinations in restraint of trade and other unfair trade practices. Under the Constitution, monopolies are not illegal in themselves as opposed to combinations in restraint of trade and other unfair competition practices that are prohibited without exception. But since the Constitution does not define what would constitute unlawful monopolies, or combinations in restraint of trade or unfair competition practices, separate legislation/or case laws are the basis for making such definitions. The Revised Penal Code defines and penalizes anticompetitive behavior that is criminal in nature. The Civil Code of the Philippiness allows the collection of damages arising from unfair competition as well as abuse of dominant positions by a monopolist. The Act to Prohibit Monopolies and Combinations in Restraint of Trade allows damages for civil liability arising from anticompetitive behavior. There are also special laws and statutes enacted to specifically address unfair competition practices. These include: The Corporation of the Philippiness (1980) It covers rules on mergers, consolidations and acquisitions. The law, however, does not address competition issues such as the possible abuse of dominant positions arising from mergers and acquisitions. The Revised Securities Act (1982) The Act prohibits and penalizes the manipulation of security prices and insider trading. The Price Act (1992): It defines and identifies illegal acts of price manipulation such as hoarding, profiteering and cartels. Through price controls and mandated ceiling mechanisms, the Act also aims to stabilize prices of basic commodities and prescribes measures against abusive price increases during emergencies and other critical situations. The Consumer Act of the Philippiness (1992) The Act prescribes conduct for business and industry. It sets penalties for deceptive, unfair and unconscionable sales practices to protect and promote the interest of consumers. It also covers consumer product quality and safety standards. The Intellectual Property Code of the Philippiness (1997) The Act provides for the protection of patents, trademarks and copyrights and the corresponding penalties for infringement.

The Downstream Oil Industry Deregulation Act of 1998 The Act liberalizes and deregulates the downstream oil industry to ensure a truly competitive market, encourage entry of new players to the industry. It introduced measures to achieve these objectives, notably the provision of anti-trust safeguards meant to ensure fair competition and prevent cartels. The Anti-Dumping Act of 1999 The Act provides for the protection of Filipino enterprises against unfair competition and trade practices. The Electric Power Industry Reform Act of 2001 The Act provides for the restructuring of the electric power industry, including the privatization of the assets of the National Power Corporation, the transition to the desired competitive structure, and the definition of the responsibilities of the various government agencies and private entities. Antitrust laws, also known as competition laws, are legal rules to promote fair competition in the marketplace. These laws can apply to both businesses and individuals. Antitrust laws are designed to prevent actions that might hurt consumers or unfairly harm other businesses, such as the formation of monopolies, illegal cooperation between competing businesses, and certain mergers between companies. These types of laws are in effect in many countries, and are even shared between countries in some cases, such as in the European Union. Competition and Monopolies In most cases, competition between businesses results in lower prices for consumers. It may also encourage businesses to provide a higher quality of goods and services in order to attract customers. When a business is a monopoly, it is the only seller of a particular product or service in its market; without competition from other businesses, it is often able to charge consumers higher prices. Antitrust laws may help prevent companies from becoming too large, eliminating their competition, or being able to fix prices in the marketplace. Collusion between Competitors Antitrust laws are often designed to prevent competing companies from working together to set prices. When companies work together or collude they may be able to raise prices without fear of a competitor offering the same type of item or service at a lower price. These laws also make it illegal for other types of collusion, such as agreeing not to compete in certain areas or with certain products. By forcing competing businesses to make decisions independently, the laws can help ensure that consumers benefit from competition within the marketplace.

Company Mergers One of the most difficult issues often addressed by antitrust laws is the merger of formerly competing companies. Many times, a merger will result in a business that is stronger, more efficient, or more stable. A merger may also reduce competition, however, leaving fewersuppliers of particular products or services in the market. This could result in higher prices and less incentive to provide consumers with higher quality goods and services. Antitrust laws often regulate mergers to help prevent monopolies and other situations where consumers or other businesses may be significantly harmed. U.S. Antitrust Laws In the United States, these types of laws essentially began with the Sherman Antitrust Act of 1890, which applied to interstate transactions. It removed limits on competitive trade and made it illegal to form a monopoly or attempt to monopolize a market. The Clayton Act, which was passed in 1914, regulates against mergers or acquisitions that would substantially decrease competition or might create a monopoly. In 1936, the RobinsonPatman Act made it illegal for producers to engage in price discrimination by allowing some businesses to purchase products at lower prices than other businesses. Various other laws also encourage fair competition in the marketplace. The U.S. Federal Trade Commission (FTC), which was formed in 1914, is charged with enforcing the country's antitrust laws. Many of the laws are not specific and are subject to interpretation about what is best for a competitive marketplace. The FTC must enforce the standards and interpret the law in each particular case. For example, the FTC often reviews mergers to determine whether they reduce competition or create monopolies. Competition Law in the European Union In the European Union, these types of laws are often similar to those in the U.S. They restrict or prohibit things such as monopolies, certain mergers, and collusion between competitors. One difference is a restriction on countries unfairly helping their own companies to give them advantages over businesses in other nations in the European Union. The European Commission, which is the executive branch of the European Union, is responsible for enforcing its competition laws. Restraint of trade From Wikipedia, the free encyclopedia Contract law Part of the common law series

Contract formation Offer and acceptance

Posting rule Mirror image rule

Invitation to treat Firm offer

Consideration Defenses against formation

Lack of capacity

Duress

Undue influence Illusory promise

Statute of frauds Non est factum Contract interpretation

Parol evidence rule

Contract of adhesion Integration clause

Contra proferentem Title-transfer theory of contract Excuses for non-performance

Mistake

Misrepresentation Frustration of purpose

Impossibility Impracticability

Illegality

Unclean hands Unconscionability

Accord and satisfaction Rights of third parties

Privity of contract

Assignment

Delegation Novation

Third-party beneficiary

Breach of contract

Anticipatory repudiation

Cover Exclusion clause

Efficient breach

Deviation Fundamental breach Remedies

Specific performance

Liquidated damages Penal damages

Rescission Quasi-contractual obligations

Promissory estoppel

Quantum meruit Implied In Fact Contracts

Implied In Fact Related areas of law

Conflict of laws

Commercial law Other common law areas

Tort law

Property law Wills, trusts and estates

Criminal law Evidence

V

Restraint of trade is a common law doctrine relating to the enforceability of contractual restrictions on freedom to conduct business. In an old leading case of Mitchell v Reynolds (1711) Lord Smith LC said,[1] "it is the privilege of a trader in a free country, in all matters not contrary to law, to regulate his own mode of carrying it on according to his own discretion and choice. If the law has regulated or restrained his mode of doing this, the law must be obeyed. But no power short of the general law ought to restrain his free discretion." A contractual undertaking not to trade is void and unenforceable against the promisor as contrary to the public policy of promoting trade, unless the restraint of trade is reasonable to protect the interest of the purchaser of a business.[2] Restraints of trade can also appear in post-termination restrictive covenants in employment contracts.

[edit]History

Chief Justice Coke, 17th century English jurist The restraint of trade doctrine is based on the two concepts of prohibiting agreements that run counter to public policy, unless the reasonableness of an agreement could be shown. A restraint of trade is simply some kind of agreed provision that is designed to restrain another's trade. For example, in Nordenfelt v Maxim, Nordenfelt Guns and Ammunition Co[2] a Swedish arms inventor promised on sale of his business to an American gun maker that he "would not make guns or ammunition anywhere in the world, and would not compete with Maxim in any way." To be a valid restraint of trade in the first place, both parties must have provided valuable consideration for their agreement to be enforceable. In Dyer's Case[3] a dyer had given a bond not to exercise his trade in the same town as the plaintiff for six months but the plaintiff had promised nothing in return. On hearing the plaintiff's attempt to enforce this restraint, Hull J exclaimed, "per Dieu, if the plaintiff were here, he should go to prison till he had paid a fine to the King." The common law evolved with changing business conditions. So in the early 17th century case of Rogers v Parry[4] it was held that a promise by a joiner not to trade from his house for 21 years was enforceable against him since the time and place was

certain. It was also held (by Chief Justice Coke) that a man cannot bind himself to not use his trade generally. This was followed in Broad v Jolyffe[5] and Mitchell v Reynolds[1] where Lord

Macclesfield asked, "What does it signify to a tradesman in London what another does in Newcastle?" In times of such slow communications and commerce around the country it seemed axiomatic that a general restraint served no legitimate purpose for one's business and ought to be void. But already in 1880 in Roussillon v Roussillon[6] Lord Justice Fry stated that a restraint unlimited in space need not be void, since the real question was whether it went further than necessary for the promisee's protection. So in the Nordenfelt[2] case Lord Macnaghten ruled that while one could validly promise to "not make guns or ammunition anywhere in the world" it was an unreasonable restraint to "not compete with Maxim in any way." This approach in England was confirmed by the House of Lords in Mason v The Provident Supply and Clothing Co.[7] [edit]Restraining workers See also: Non-compete clause Restraining clauses in employment contracts are enforceable if:

There is a legitimate interest which needs to be protected. Examples of such interests include business connections and business secrets. The restraint is reasonable, i.e. sufficiently protects the interest and goes no further.

Generally, if a restraining clause is found to be unreasonable, then it will be void. In certain circumstances though the court may uphold it either by construing ambiguities or by severance. Severance consists of the application of what is known as the "blue pencil test"; if individual words which make the clause excessively wide are able to be crossed out and the clause still makes grammatical sense, without altering the nature of the obligations, then the courts may be willing to sever the illegal aspects of the clause and enforce the remainder. [edit]Contemporary application Though the restraint of trade doctrine is still valid, the current use has been limited by modern and economically oriented statutes of competition law in most countries.

Anti-competitive practices From Wikipedia, the free encyclopedia This article does not cite any references or sources. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (July 2008) Anti-competitive practices are business or government practices that prevent or reduce competition in a market (see restraint of trade). Contents [hide]

1 Anti-competitive practices 2 Effects 3 See also 4 References 5 External links [edit]Anti-competitive practices These can include:

Dumping, where a company sells a product in a competitive market at a loss. Though the company loses money for each sale, the company hopes to force other competitors out of the market, after which the company would be free to raise prices for a greater profit.

Exclusive dealing, where a retailer or wholesaler is obliged by contract to only purchase from the contracted supplier. Price fixing, where companies collude to set prices, effectively dismantling the free market. Refusal to deal, e.g., two companies agree not to use a certain vendor Dividing territories, an agreement by two companies to stay out of each other's way and reduce competition in the agreed-upon territories. Limit Pricing, where the price is set by a monopolist at a level intended to discourage entry into a market.

Tying, where products that aren't naturally related must be purchased together. Resale price maintenance, where resellers are not allowed to set prices independently.

Also criticized are:

Absorption of a competitor or competing technology, where the powerful firm effectively co-opts or swallows its competitor rather than see it either compete directly or be absorbed by another firm.

Subsidies from government which allow a firm to function without being profitable, giving them an advantage over competition or effectively barring competition Regulations which place costly restrictions on firms that less wealthy firms cannot afford to implement Protectionism, Tariffs and Quotas which give firms insulation from competitive forces Patent misuse and copyright misuse, such as fraudulently obtaining

a patent, copyright, or other form of intellectual property; or using such legal devices to gain advantage in an unrelated market.

Digital rights management which prevents owners from selling used media, as would normally be allowed by the first sale doctrine.

[edit]Effects This article may need to be rewritten entirely to comply with Wikipedia's quality standards. You can help. The discussion page may contain suggestions. (May 2009)

"I Like a Little Competition"J. P. Morgan by Art Young. Cartoon relating to the answer J. P. Morgan gave when asked whether he disliked competition at the Pujo Committee.[1] It is usually difficult to practice anti-competitive practices unless the parties involved have significant market power or government backing. Monopolies and oligopolies are often accused of, and sometimes found guilty of, anticompetitive practices. For this reason, company mergers are often examined closely by government regulators to avoid reducing competition in an industry. Although anti-competitive practices often enrich those who practice them, they are generally believed to have a negative effect on the economy as a whole, and to disadvantage competing firms and consumers who are not able to avoid their effects, generating a significant laws to social prevent cost. For these reasons, practices, most and countries government have competition anti-competitive

regulators to aid the enforcement of these laws. The argument that anti-competitive practices have a negative effect on the economy arises from the belief that a freely functioning efficient market economy, composed of many market participants each of which has limited market power, will not permit monopoly profits to be earned...and consequently prices to consumers will be lower, and if anything there will be a wider range of products supplied.

Some people[who?] believe that the realities of the marketplace are sometimes more complex than this or similar theories of competition would suggest. For example, oligopolistic firms may achieve economies of scale that would elude smaller firms. Again, very large firms, whether quasi-monopolies or oligopolies, may achieve levels of sophistication e.g. in business process and/or planning (that benefit end consumers and) that smaller firms would not easily attain. There are undoubtedly industries (e.g. airlines and pharmaceuticals) in which the levels of investment are so high that only extremely large firms that may be quasi-monopolies in some areas of their businesses can survive. Many governments regard these market niches as natural monopolies, and believe that the inability to allow full competition is balanced by government regulation. However, the companies in these niches tend to believe that they should avoid regulation, as they are entitled to their monopoly position by fiat. In some cases, anti-competitive behavior can be difficult to distinguish from competition. For instance, a distinction must be made between product bundling, which is a legal market strategy, and product tying, which violates anti-trust law. Some advocates of laissez-faire capitalism (such asMonetarists, some Neoclassical economists, and the heterodox economists of the Austrian school) reject the term, seeing all "anti-competitive behavior" as forms of competition that benefit consumers.

RECOMMENDATIONS FOR PHILIPPINE ANTI-TRUST POLICY AND REGULATION 1 Anthony Amunategui Abad Introduction Various economic reforms were introduced in the Philippines through substantial trade and investment liberalization, deregulation and privatization during the administration of President Fidel V. Ramos (1992-1998). These reforms have led to the realization that freer trade and open markets are good for Filipinos in general. Substantial

efficiency and welfare gains were brought about by increased competition from new products and services. Inversely, the Philippines' long and sad history of underdevelopment can actually be traced to a lack of competition in its economy. With this important realization, the Ramos administration adopted a policy of introducing more competition-enhancing measures, such as the further lowering of trade and investment barriers and the reform of certain economic regulations. Throughout the years, awareness of the need for a new and comprehensive framework for anti-trust policy and regulation has increased within the Philippines, and the central role played by antitrust policy in economic reform measures for enhancing competition is now recognized. There have been a number of draft bills 2 for a proposed anti-trust or competition law filed in Congress, reflecting a growing appreciation by Philippine political leaders of their importance. These bills could form the nucleus of a truly comprehensive framework for anti-trust policy and regulation. It is unfortunate that these bills did not form part of the priority measures under the term of President Joseph E. Estrada (1998-2001), the administration succeeding Ramos, and have therefore languished as pending legislation. The same holds true until now under the present administration headed by President Gloria Macapagal-Arroyo. 3 To avoid committing these past mistakes of omission , a thorough study of the Philippines current approach to sustaining a market-oriented economy and regulating

economic activity, will be needed. Reviewing existing economic laws and regulations and testing their effectiveness as tools for promoting economic efficiency and public welfare through competition should also be done. These analyses can then form the basis for crafting a framework for anti-trust policy and regulation, and probably the direction that the Philippines should be headed in to become truly pro-competition.

1 Paper presented during the conference entitled Policies to Strengthen Productivity in the Philippines, sponsored by the Asia-Europe Meeting (ASEM) Trust Fund, Asian Institute of Management Policy Center, Foreign Investment Advisory Service, Philippines Institute of Development Studies and the World Bank, June 27-28, 2005 2 See Appendix 2 for such bills. 3 2001 to date Recommendations for Philippine Anti-Trust Policy and Regulations page 2 of 53 Rationale and Scope Since competition policy is a rather broad topic encompassing various aspects of functioning market economies, this paper will focus on specific key areas. The emphasis of this paper is on the legal and regulatory aspects of competition policy, particularly the framework for effective enforcement of competition in all sectors of the Philippine economy. This is important because of its bearing on the actual implementation of competition policy in the country.

The scope of work and objectives of this paper are: 1. 2. 3. 4. 1. 2. to review existing anti-trust laws and regulations to examine the effectiveness and adequacy of these laws and regulations to examine how well these laws conform with international rules to suggest recommendations for reform. The paper will have three major components: Survey of Existing Anti-Trust Laws and Regulations in the Philippines The concept of anti-trust regulation is not exactly new to the Philippines. Apparently, old anti-trust provisions of U.S. laws found their way into the Philippine Constitution, the Revised Penal Code and Civil Code. Anti-trust enforcement is also implicitly vested in various regulatory agencies and bodies. This section of the paper surveys the existing laws and regulations that are deemed as constituting an anti-trust and/or competition policy framework for the Philippines. Analysis of Existing Anti-Trust Regulation in the Philippines Knowing the existing laws and regulations for anti-trust enforcement at the disposal of the Philippine government, what is then the actual effectiveness of these laws and regulations in promoting competition in the Philippine economy? This section analyzes the state of anti-trust regulation in this country and examines the government's thrust on implementing, and

capability to implement, anti-trust laws and regulations. It studies the general regulatory structure in place, and identifies a number of the regulators and institutions involved in the anti-trust process. How have they managed to control the behavior of the players in various industries and sectors? How have they affected the structure of markets in the Philippine economy? What are the major problem areas? Recommendations for Philippine Anti-Trust Policy and Regulations page 3 of 53 3.

Recommendations for a New Legal and Regulatory Framework for AntiTrust Enforcement in the Philippines This section recommends a new anti-trust policy and regulatory framework for the Philippines. Given the Philippines' long history of protectionism and over-regulation, market distortions are rampant in the economy despite the existence of basic anti-trust laws and regulations. Therefore, there is still a need to propose a more effective framework for anti-trust regulation in this country. Such a framework should first lay down the basic policy objectives and principles, and then spell out the basic structure for regulation. This section also suggests certain basic provisions for new anti-trust legislation and mechanisms for more effective enforcement. This section also covers draft bills on the proposed anti-trust or competition law of the Philippines. Survey of Existing Anti-Trust Laws and Regulations in the Philippines Anti-trust laws and regulations are not new to the Philippines. Apparently, old anti-trust provisions of U.S. laws found their way into the Philippine Constitution, the

Revised Penal Code and Civil Code. Anti-trust enforcement is also implicitly vested in various regulatory agencies and bodies. This section of the paper surveys laws and regulations that are deemed as the existing anti-trust and/or competition policy framework of the Philippines. The Constitution Under the Constitution, 4 the State is mandated to regulate or prohibit monopolies, combinations in restraint of trade and other unfair competition practices, for the sake of public interest. These provisions were based on the U.S. Sherman Act. Note that the Constitution does not prohibit monopolies per se. Monopolies are not illegal in themselves, as opposed to combinations in restraint of trade and other unfair competition practices. The latter are to be prohibited without exception. However, since the Constitution does not define what would constitute unlawful monopolies, or combinations in restraint of trade or unfair competition practices, separate legislation and/or case laws are the bases for making such definitions. Criminal Law Republic Act (R.A.)No. 3815 as amended, otherwise known as the Revised Penal Code, punishes anti-competitive behavior that is criminal in nature. Article 186 defines 4 Constitution, Article XII, Section 19 Recommendations for Philippine Anti-Trust Policy and Regulations page 4 of 53

and penalizes monopolies and combinations in restraint of trade while Article 187 provides penalties. Combinations in restraint of trade are defined as: 1. 2. 3. 1. 2.

Any agreement, whether in the form of a contract or conspiracy or combination in the form of trust or otherwise, resulting in the restraint of trade or commerce Preventing by artificial means free competition in the market Any manner of combination, conspiracy, or agreement between or among manufacturers, producers, processors, or importers of any merchandise or object of commerce, or with any other persons, for the purpose of making transactions prejudicial to lawful commerce, or increasing the market price of such merchandise or object of commerce or of any other article in the manufacture, production, or processing, or importation of which such merchandise or object of commerce is used. Illegal monopolies are defined as: Monopolizing any merchandise or object of trade or commerce Combining with any other person or persons to monopolize any merchandise or object of trade or commerce, in order to alter the price thereof by spreading false rumors or making use of any other artifice to restrain free competition in the market.

The Revised Penal Code also penalizes other frauds in commerce and industry such as falsely marking gold and silver articles and altering trademarks 5 . Civil Law R.A. No. 386 (1949) as amended, otherwise known as the Civil Code of the Philippines and which took effect in August 1950, allows the collection of damages arising from unfair competition in agricultural, commercial, or industrial enterprises or in labor 6 It also allows the collection of damages arising from abuse in the exercise of rights and in the performance of duties 7 , e.g., abuse of a dominant market position by a monopolist. Peculiarly enough, the Civil Code does not define unfair competition and merely lists the means by which unfair competition can be committed: force, intimidation, deceit, machination, or any other unjust, oppressive or highhanded method. Treble damages for civil liability arising from anti-competitive behavior is allowed under R.A. No. 165, otherwise known as An Act to Prohibit Monopolies and Combinations in Restraint of Trade. 5 Republic Act No. 166 (1947) 6 Article 28

7 Article 19 Recommendations for Philippine Anti-Trust Policy and Regulations page 5 of 53 Special Laws Special laws specifically address some unfair competition practices. 1. R.A. No. 9136 (2001), otherwise known as the Electric Power Industry Reforms Act of 2001 This Act provides for the restructuring of the electric power industry, including the privatization of the assets of the National Power Corporation, the transition to the desired competitive structure, and the definition of the responsibilities of the various government agencies and private entities. 2. R.A. No. 8752 (1999), otherwise known as the Anti-Dumping Act of 1999 This law was passed to protect Filipino enterprises against unfair foreign competition and trade practices. 3. R.A. No. 8479 (1998), otherwise known as the Downstream Oil Industry Deregulation Act of 1998 This law led to the liberalization and deregulation of the downstream oil industry to ensure a competitive market to encourage fair pricing, adequate and continuous supply of environmentally-clean and high-quality petroleum products. 4. 5.

R.A. No. 8293 (1997), otherwise known as the Intellectual Property Code of the Philippines This law provides for the protection of patents

8 , trademarks 9 , and copyrights 10 and the corresponding penalties for infringement. Batas Pambansa Blg. 68 (1980), otherwise known as the Corporation Code of the Philippines This law provides for the rules regarding mergers and consolidations 11 and the acquisition of all or substantially all the assets or shares of stock of corporations 12 . It must be noted, however, that the Corporation Code does not address the problem of the probable abuse of a dominant position when horizontal mergers occur, e.g. merger of three shipping lines - Aboitiz, William Lines, and Gothong Lines into the WGA Super Ferry, or in case of vertical acquisitions, e.g. the acquisition by Metro Pacific Corporation, owner of cellular phone company, SMART Communications, Inc., of Philippine Long Distance Telephone Company, along with Sequel Net (an Internet service provider), and Home Cable. 8 Rep. Act No. 8293 (1997), at Part II 9

Id., at Part III 10 Id., at Part IV 11 Title IX 12 Title IV, Sections 40 and 42 Recommendations for Philippine Anti-Trust Policy and Regulations page 6 of 53 6. 7.

Batas Pambansa Big. 178 (1982) as amended, otherwise known as the Revised Securities Act This law complements the Corporation Code. It prohibits and penalizes the manipulation of security prices and insider trading 13 . R.A. 7581 (1991), otherwise known as the Price Act, and R.A. 7394 (1932), otherwise known as the Consumer Act of the Philippines Consumer welfare and protection is also an important aspect of competition policy. In this area, the significant laws are the Price Act and the Consumer Act of the Philippines. The Price Act defines and identifies illegal acts of price manipulation such as, hoarding, profiteering and cartels. Through price controls and mandated ceiling mechanisms, the Price Act also seeks to stabilize the

prices of basic commodities and prescribes measures against abusive price increases during emergencies and other critical situations. The Consumer Act of the Philippines provides for consumer product quality and safety standards. It also covers deceptive, unfair, and unconscionable sales acts and practices (including weight and measures, product and service warranties), consumer credit transactions, and penalties for violations of the statute. Jurisprudence Since the law itself is not clear, case law or judicial interpretation is particularly important in defining unlawful monopolies, combinations in restraint of trade, and unfair competition practices. The Supreme Court has affirmed the need to "... recast our laws on trust, monopolies, oligopolies, cartels and combinations injurious to public welfare to restore competition where it has disappeared and to preserve it where it still exists. In a word, we need to perpetuate competition as a system to regulate the economy and achieve global product quality.? 14 Defining Unfair Competition. To date, there have been only two cases decided by the Supreme Court defining monopoly. In the case of Gokongwei, Jr. v Securities and Exchange Commission, et al., 15 the Supreme Court narrowly defined monopoly as 13

Id. at secs. 26 and 30. Sec. 15 also provides for the revocation of registration for engaging in fraudulent acts in connection with the sale of securities. Sec. 27 prohibits manipulative and deceptive devices, sec. 28 artificial measures of price control, and sec. 29 fraudulent transactions. 14 Tatad v The Secretary of the Department of Energy and The Secretary of the Department of Finance, etc, G.R. Nos. 14360 and 17867, Decision En Banc dated 03 December 1997 on the Motion for Reconsideration, citing the State of the Nation Address of President Fidel V. Ramos, 3rd Session of the Ninth Congress, 25 July 1994. 15 G.R. No. L-45911, 89 SCRA 339 (1979) Recommendations for Philippine Anti-Trust Policy and Regulations page 7 of 53 "unified tactics with regard to price." Further, it apparently considered a monopoly as undesirable in itself, and not the abuse of a monopoly or dominant position. "A 'monopoly' embraces any combination the tendency of which is to prevent competition in the broad and general sense, or to control prices to the detriment of the public. In short, it is the concentration of business in the hands of a few. The material consideration in determining its existence is not that prices are raised and competition actually excluded, but that power exists to raise prices or exclude competition when desired. Further, it must be understood that the idea of a monopoly is now understood to include a condition produced by the mere act of individuals. Its dominant thought is the notion of exclusivity or unity, or the suppression of competition by the unification of interest or management, or it may

be through agreement and concert of action. It is, in brief, unified tactics with regard to price." In the Gokongwei case, John Gokongwei, Jr. acquired enough shares of stock to get himself elected to the board of directors of San Miguel Beer Corporation (SMBC), a beer manufacturer. manufacturing However, Mr. Gokongwei also controlled a rival beer

company, Asia Brewery, Inc. The Supreme Court held Mr. Gokongwei's action as constituting unfair competition. In the Tatad case, 16 the Supreme Court, in its original decision, held that: "A monopoly is a privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right or power to carry on a particular business or trade, manufacture a particular article, or control the sale or the whole supply of a particular commodity. It is a form of market structure in which one or a few firms dominate the total sales of a product or service." (Citations omitted) In the Gokongwei case, it was likewise held that a monopoly can be achieved through the "suppression of competition by the unification of interest or management, or it may be thru agreement and concert of action. 17 Thus, even mergers and consolidations of companies, where these could lead to unfair competition, can be regulated. The Tatad case 18 also defined combinations in restraint of trade and differentiated

a combination from a monopoly: "On the other hand, a combination in restraint of trade is an agreement or understanding between two or more persons, in the form of a contract, trust, pool, holding company, or other form of association, for the purpose of unduly restricting competition, monopolizing trade and commerce in a certain commodity, controlling its production, distribution and price, or otherwise interfering with the freedom of trade without statutory authority. Combination in restrain of trade refers to the means while monopoly refers to the end." (Citations omitted}

16 G.R. Nos. 124360 and 127867. Decision En Banc dated 05 November 1997 17 Id., at note 14 18 Id., at note 13 Recommendations for Philippine Anti-Trust Policy and Regulations page 8 of 53 Note that the Supreme Court emphasized that for unfair competition to exist, there need not be an actual injury. It is sufficient that the "power exists to raise prices or exclude competition when desired." With the Supreme Courts ruling that the Senate did not commit a grave abuse of discretion in ratifying the World Trade Organization (WTO) Agreement and its three Annexes, any judicial obstacle against the government's adoption of a policy of trade liberalization by enlisting the Philippines in the WTO was removed 19 .

"Moreover, GATT itself has provided built-in protection from unfair foreign competition and trade practices including antidumping measures, countervailing measures and safeguards against import surges. Where local business are (sic) jeopardized by unfair foreign competition, the Philippines can avail of these measures. There is hardly therefore any basis for the statement that under the WTO, local industries and enterprises will all be wiped out and that Filipinos will be deprived of control of the economy. Quite the contrary, the weaker situations of developing nations like the Philippines have been taken into account; thus, there would be no basis to say that in joining the WTO, the respondents have gravely abused their discretion. True, they have made a bold decision to steer the ship of state into the yet uncharted sea of economic liberalization. But such decision cannot be set aside on the ground of grave abuse of discretion, simply because we disagree with it or simply because we believe only in other economic policies. As earlier stated, the Court in taking jurisdiction over this case will not pass upon the advantages and disadvantages of trade liberalization as an economic policy. It will only perform its constitutional duty of determining whether the Senate committed grave abuse of discretion. XXX The WTO reliance on most favored nation,' 'national treatment,' and 'trade without discrimination' cannot be struck down as unconstitutional as in fact they are rules of equality and reciprocity that apply to all WTO members. Aside from envisioning a trade policy based on 'equality and reciprocity,' the fundamental law encourages industries that are 'competitive in both domestic and foreign markets,' thereby demonstrating a clear policy against a sheltered domestic trade environment, but one in favor of the gradual development of robust industries that can compete with the best in foreign markets. Indeed, Filipino managers and

Filipino enterprises have shown capability and tenacity to compete internationally. And given a free trade environment. Filipino entrepreneurs and managers in Hong Kong have demonstrated the Filipino capacity to grow and to prosper against the best offered under a policy of laissez faire." (Emphasis supplied) Another case of interest is Congressman Enrique T. Garcia vs. Hon. Renato C. Corona, et al.,. 20 which is related to the Tatad case. Rep. Garcia challenged the legality of the lower houses enactment of Republic Act No. 8479, the Downstream Oil Industry

19 Wigberto E. Taada, el al v. Edgardo J. Angara, el at., G.R. No. 118295, En Banc Decision dated 02 May 1997 (272 SCRA 18) 20 G.R. No. 132451. December 17, 1999 Recommendations for Philippine Anti-Trust Policy and Regulations page 9 of 53 Deregulation law amending Republic Act No. 8180, which was the subject of the Tatad case, by way of deleting the questioned provisions in the Tatad case. argued Rep. Garcia

that Section 19 of Republic Act No. 8479, which prescribes the period for the removal of price controls on gasoline and other finished products and for the full deregulation of the local downstream oil industry, is in violation of the constitutional prohibition against monopolies and combinations in restraint of trade. Therefore, there should be indefinite

and open-ended price controls on gasoline and other oil products for as long as necessary to prevent the "Big 3" - Shell, Caltex and Petron - from price-fixing and overpricing. This position is contrary to the Government's, i.e., deregulation will eventually prevent monopoly. In the end, the Supreme Court dismissed Rep. Garcias petition, stating that: the challenged provision is a policy decision of Congress and that the wisdom of the provision is outside the authority of this Court to consider. xxx Petitioner argues further that the public interest requires price controls while the oligopoly exists, for that is the only way the public can be protected from monopoly or oligopoly pricing. But is indefinite price control the only feasible and legal way to enforce the constitutional mandate against monopolies? Justice Panganiban, in a separate opinion, states: "In essence, deregulation shifts the burden of price control from the government to the market forces in order (1) to eliminate government intervention that may do more harm than good and (2) to achieve a truly competitive market of fair prices. It is also aimed at removing government abuse and corruption in price-setting. At bottom, deregulation is supposed to provide the best goods and services at the cheapest prices." (Citations omitted) Enforcement of Anti-Trust Laws and Regulations in the Philippines Under these various special laws, there are certain agencies that should be enforcing competition: General Agencies 1. Department of Trade and Industry (DTI) and its attached agencies, including the Bureau of Trade Regulation and Consumer Protection

(BTRCP), Bureau of Food and Drugs (BFAD), Intellectual Property Office (IPO), Bureau of Product Standards (BPS), and Bureau of Import Services (BIS). The DTI, BTRCR, BFAD, and BPS look out for consumer welfare, while the IPO is in charge of the protection of intellectual property rights. Recommendations for Philippine Anti-Trust Policy and Regulations page 10 of 53 2. Securities and Exchange Commission (SEC) The SEC supervises and monitors stock and non-stock corporations, and resolves ultra-corporate disputes, and regulates all forms of securities, brokers and dealers, financing companies and investment houses. 3. Philippine Economic Zone Authority (PEZA) The PEZA supervises ecozone developers and ecozone-registered enterprises. 4. Bases Conversion and Development Authority (BCDA) The BCDA administers and develops former military bases, other than Subic and Clark, and supervises BCDA-registered enterprises. 5. Subic Bay Metropolitan Authority (SBMA) The SBMA administers and develops the former American Subic Naval Base, and supervises SBMA-registered enterprises. 6. Clark Development Corporation (CDC) The CDC administers and develops the former U.S. Clark Air Base, and Clark-registered enterprises. 7. National Library The National Library is in-charge of copyright registration. Together with the Supreme Court Library, it is also the depository of copyrighted

materials and other items. Industry-Specific Agencies 8. 9. 10. 11. 12. 13. 14. 15. Bangko Sentral ng Pilipinas (BSP), for banks and financial institutions Insurance Commission (IC), for insurance companies Philippine Tourism Authority (PTA), for the tourism industry Housing and Land Use Regulatory Board (HLURB), for land use and real estate development National Food Authority (NFA), for rice, corn, wheat and other grains and food stuffs Sugar Regulatory Administration (SRA), for the sugar industry Philippine Coconut Authority (PCA), for the coconut industry Garments and Textile Export Board (GTEB), for garment manufacturers and exporters Board of Investments (BOI), for pioneer or non-pioneer industries and those listed in the Investments Priorities Plan that avail of the incentives under the Omnibus Investments Code. Recommendations for Philippine Anti-Trust Policy and Regulations page 11 of 53

16. 17. 18. 19. 20. 21. 1. 2. National Telecommunications Commission (NTC), for telecommunications companies Land Transportation Franchising and Regulatory Board (LTFRB), for common carriers for land Civil Aeronautics Board (CAB), for companies engaged in air commerce Maritime Industry Authority (MARINA), for the shipping industry Philippine Ports Authority (PPA), for port operators and arrastre services Department of Energy (DOE), Energy Regulatory Board (ERB), and the National Power Corporation (NAPOCOR), for power generation companies and oil companies. National Telecommunications Commission (NTC) vs. Commission on Information and Communications Technology (CICT) The NTC is the government agency created under Executive Order No. 546 (s.1979), and conferred the regulatory and quasi-judicial functions of the Board of Communications and the Telecommunications Control Bureau, which were abolished in the same Executive Order. The CICT was created as the primary policy, planning, coordinating, implementing, regulating, and administrative entity of the Philippine

government, tasked to promote, develop, and regulate integrated and strategic information and communications technology systems and reliable and cost-efficient communication facilities and services. However, there is some controversy regarding the creation of this agency by Executive Order on 12 January 2004, under the Office of the President. The CICT appears to overstep the jurisdiction and functions of the NTC. While the NTC was also created by executive order in 1979, the NTC Executive Order had the force of legislation as it was issued at the time when then President Ferdinand E. Marcos had legislative powers. Other Laws There are various laws and regulations that do not explicitly implement competition policy yet. All of them, either directly or indirectly, restrict or open market access or investment flows, and hence, affect competition. International treaties, such as WTO agreements, have the force of law in the Philippines, and encourage international competition through trade liberalization. Some agreements that are directly relevant to competition policy and restrictive business practices are: Agreement on the Implementation of Article VI of GATT 1994 on antidumping Agreement on Subsidies and Countervailing Measures and the Agreement on Safeguards, particularly Article 11:2 on voluntary export restraints, orderly marketing arrangements, etc., maintained by the government, and Article 11:3 on equivalent nongovernmental Philippine Anti-Trust Policy and Regulations page 12 of 53 3. 4. measures Recommendations for

5. 1. 2. 3. 4. 5. 6. 7. General Agreement on Trade in Service (GATS), particularly Article VIII on supply of services by a monopolist in a member country, and required consultations with other member countries Agreement on Trade-Related aspects of Intellectual Property Rights (TRIPs), including trade in counterfeit goods, particularly Article 8 on the abuse of intellectual property rights by right holders and Articles 31 and 40 on licensing practices and conditions on use Agreement on Trade-Related Investment Measures (TRIMs), particularly Article 9 on amending TRIMs to be complemented with investment policy and competition policy. Proposed Anti-Trust Legislation Realizing the deficiencies of the existing legal and regulatory systems for enforcing competition, the Philippine government, through the legislature, has been attempting to pass new anti-trust or competition legislation since the early 1980s. The numerous draft bills have been quite varied, having been adopted from various existing anti-trust and competition laws around the world. Unfortunately, a lack of appreciation and political will have kept these proposed laws out of the government's priority list.

Consequently, quite a number of draft anti-trust or competition laws have accumulated over the years, but none of these have actually been acted upon. Both Houses of the present 13th Congress already have a number of draft laws submitted. In the House of Representatives, there are eight draft bills, namely: House Bill No. 116 - "An Act Creating the Philippine Competition Commission, Regulating and Penalizing Trade Practices that Lessen Competition and Other Anti-Competitive Practices and Conduct, Unlawful Mergers, Acquisitions and Combinations in Restraint of Trade, Unfair Competition, and Appropriating Funds Therefor, and for other purposes" - authored by Rep. Joey Sarte Salceda House Bill No. 117 - "An Act Providing for the Regulation of Investment Companies" authored by Rep. Joey Sarte Salceda House Bill No. 400 - "An Act Instituting a System of Allowing Parallel Importation of Medicines into the Country" - authored by Rep. Roseller L. Barinaga House Bill No. 567 - "An Act Establishing a National Cellular and Wireless Telephone Program" - authored by Rep. Roilo Golez House Bill No. 1874 - "An Act Prescribing a Fair Competition Law, its Enforcement, the Establishment of a Fair Trade Commission, Delineating its Powers and Functions, and for other purposes" - authored by Rep. Jose C. De Venecia, Jr. House Bill No. 2251 - "An Act to Promote the Efficient and Effective Delivery of Converging Communications Services" - authored by Rep. Jacinto V. Paras House Bill No. 2958 - "An Act Prohibiting Monopolies, Attempt to Monopolize an Industry or Line of Commerce, Manipulation of Prices of Commodities, Asset

Acquisition and Interlocking Memberships in the Board of Directors of Competing Recommendations for Philippine Anti-Trust Policy and Regulations page 13 of 53 Corporate Bodies and Price Discrimination Among Customers, Providing Penalties Therefor, and for other Purposes" - authored by Rep. Edgar L. Valdez 8. 1. 2. 3. House Bill No. 3139 - "An Act Prohibiting Monopolies, Attempt to Monopolize an Industry or Line of Commerce, Manipulation of Prices of Commodities, Asset Acquisition and Interlocking Memberships in the Board of Directors of Competing Corporate Bodies and Price Discrimination Among Customers, Providing Penalties Therefor, and for other purposes" - authored by Rep. Juan Ponce Enrile, Jr. In the Senate, there are three draft bills, namely: Senate Bill No. 150 - "An Act Creating the Fair Trade Commission, Prescribing its Powers and Functions in Regulating Trade Competition and Monopolies, and For Other Purposes" - authored by Sen. Sergio Osmea III Senate Bill No. 1600 - the Anti-Trust Act of 2001 or "An Act Prohibiting Monopolies, Attempt to Monopolize an Industry or Line of Commerce, Manipulation of Prices of Commodities, Asset Acquisition and Interlocking Memberships in the Board of Directors of Competing Corporate Bodies and Price Discrimination Among Customers, Providing Penalties Therefor, and for other purposes" - authored by Sen. Panfilo M. Lacson Senate Bill No. 1792 - "An Act Prohibiting Monopolies, Attempt to Monopolize an

Industry or Line of Commerce, Manipulations of Prices of Commodities, Asset Acquisition and Interlocking Memberships in the Board of Directors of Competing Corporate Bodies and Price Discrimination among Customers, Providing Penalties Therefor and for Other Purposes" - authored by Sen. Juan Ponce Enrile. According to the Committee on Trade and Industry of the House, with which the bills are pending, only one hearing on anti-trust legislation has been conducted and so far, the measures have been put on hold. No committee report has yet been issued on the subject nor has it even been calendared in the order of business of the House. In the Senate, the Committee on Ways and Means has conducted only one hearing. In the meantime, Sen. Osmea is preparing for a set of Committee hearings. However, these have yet to be scheduled. Unfortunately, despite the obvious importance of the proposed competition measure in the economic development program of the government, it has not even been declared a priority measure by the Executive branch. Analysis of Anti-Trust Regulation in the Philippines Historically, developed countries have used and are using anti-trust regulation to foster and maintain competition that ensures an efficient, working market economy and modern democracy. Competition, through its allocative, distributive and incentive functions, can prevent undue concentration of economic power and the consequent concentration of political power in the economic elite who use their economic and political powers to have their inefficiencies subsidized by the majority of consumers and

taxpayers. Recommendations for Philippine Anti-Trust Policy and Regulations page 14 of 53 Knowing the existing laws and regulations for anti-trust enforcement at the disposal of the Philippine government, what is then the actual effectiveness of these laws and regulations in promoting competition in the Philippine economy? This section analyzes the state of anti-trust laws and regulations in this country and examines the government's capability to implement its anti-trust laws and regulations. It studies the general regulatory structure in place and identifies a number of the regulators and institutions involved in the anti-trust process. How have they managed to control the behavior of the players in various industries and sectors? How have they affected the structure of markets in the Philippine economy? What are the major problem areas? Structure of Markets in the Philippine Economy: A General Assessment The Philippine economy is characterized by a high concentration of wealth and resources in a few groups comprising the nations elite class. The top 5.5 percent of all landholding families own 44 percent of all tillable land and the richest 15 percent of all families account for 52.5 percent of all the national income (Almonte 1993). Moreover only 10 corporations in 1991 accounted for 26 percent of all revenues, 40 percent of all net income, and 34 percent of total assets of the top 1000 corporations (SEC 1991). Morerover, studies confirm a high concentration ratio in ownership and production, i.e., the measure of the market share of the top three or four firms to total market size in certain key industries: petroleum, iron and steel manufacturing, fertilizer, pulp and paper, home appliance manufacturing, tobacco and cigarette, and tire manufacturing. This high concentration ratio is a direct result of the failed economic policies of

the past, particularly from a surfeit of regulation and a dearth of competition. The Philippine government adopted a strategy of import substitution, protectionism and the allocation of resources through regulation. In the guise of "nationalism" predominant in the 1950s and 1960s, domestic enterprises, especially the so-called infant industries, were pampered and protected from foreign competition through the imposition of high tariffs or outright quota restrictions on imported products and similar measures. These measures, which persist to the present, encouraged the rentseeking, import-substituting, capital-intensive, and oligopolistic behavior of Philippine domestic enterprises. The requirement for franchises and licenses was also used as a device to protect incumbents by disqualifying competitors. The main purpose and effect of such requirement is to reserve (specific) areas to franchisee or licensee, and hence exclude others. Franchises are awarded by acts of Congress and are distinct from permits to operate, which are dispensed by agencies regulating public utilities. This fact makes the award of franchises potentially open to wider rent-seeking or political considerations. The high concentration ratio in various industries is also directly attributable to entry barriers that prevent new participants from entering and competing in the same industry. The Philippine economy, therefore, is largely captive to a small group of economic interests who have succeeded in maintaining market dominance by successfully excluding other firms from entering to participate and compete in the markets. Recommendations for Philippine Anti-Trust Policy and Regulations page 15 of 53 With this concentration of economic power, political power was likewise

concentrated in the hands of the elite. Only 60 to 100 political clans control all elective positions at the national level. The Philippine Congress, on the basis of reported statements of assets and liabilities submitted by its members, is composed largely of multimillionaires. The marriage of economic and political power presents a formidable hindrance to any form of change that may, or threaten to, alter the existing status quo. The immediate past two government administrations saw the articulation of plans and programs to reform the economy and open up the markets to competition. From 1992 to 1998, significant executive and legislative reform measures promoted unexpected advances in economic growth and development for the Philippines. Annual growth rates dramatically increased, from 0.5 percent in 1992 to 7.1 percent in 1996. There were also tangible improvements of consumer welfare in key sectors, such as telecommunications, air and water transport, consumer goods, and industrial inputs. The Philippines also joined various multilateral and regional trading and economic cooperation arrangements, such as the ASEAN Free Trade Area (AFTA), the Asia Pacific Economic Cooperation (APEC), and the World Trade Organization (WTO). All these arrangements sought to liberalize trade and investments, and provide the Philippines with the much-needed external pressure to introduce internal reforms. However, trade and investment liberalization and deregulation were not sufficient to make the Philippines globally competitive. Merely liberalizing trade and investments is not enough to achieve sustainable and stable competitiveness. One crucial lesson from the success of the recent economic reforms is that competition played a key role in improving

capital accumulation, technological

factor

productivity,

efficiency

in

resource

allocation,

advancement and innovation. It should be noted that throughout all these economic reform measures, the issue of maintaining competition and sustaining competitiveness has not been addressed. All these recent reform efforts may actually be reversed and wasted unless the various measures are rationalized and embraced under a well-articulated and comprehensive competition policy framework. After having enticed and invited investors to do business in the Philippines, measures must also be adopted to make them stay. These involve not only the removal of the barriers to entry but also the enforcement of existing laws and the introduction of new measures to foster and maintain fair competition in the Philippine economy. The Inadequacy of Existing Anti-Trust Laws and Regulations Present laws for promoting competition in the Philippines have been proven inadequate or ineffective to stave off the ill effects of anti-competitive structures and behavior in the market, mainly due to lack of enforcement. Despite the considerable number of laws and their varied nature, competition has not been fully established in all sectors of the economy, nor has existing competition in other sectors of the market been enhanced. These laws have been hardly used or Recommendations for Philippine Anti-Trust Policy and Regulations page 16 of 53 implemented as may been seen in the lack of cases litigated in court. The same laws have even worked to discourage competition. Several reasons have been forwarded to explain the lack of enforcement of competition laws in the Philippines (Lazatin 1994).

"Too many cooks" There is a saying that, "Too many cooks spoil the broth." With so many enforcement agencies, responsibility is too diffused and accountability for implementation of the laws is difficult to fix. Some regulators are unable to relate all the different existing laws and regulations (Khemani 1996). Moreover, there is a lack of expertise in the appreciation and implementation of competition laws that rely heavily on economic thought, techniques of analysis, and value preferences as tools of enforcement (Khemani 1996). Identifying a single specialized agency under a specific competition law, with the necessary expertise and authority to oversee the enforcement of competition laws, is therefore critical. "Regulatory capture" With a specific agency regulating each industry, the danger of regulatory capture is inevitable. In time and with familiarity, it is the industry that ultimately regulates the regulator. For instance, the CABs policies have favored privately-owned Philippine Air Lines and discouraged Consequently, granting more flights to and from the Philippines.

efforts to boost the economy through tourism is effectively hindered. No "user-friendly" enforcement mechanism and comprehensive competition law Of course, the number of enforcement agencies is a direct result of the many laws that established them. The objectives behind each of these laws are unquestionably noble. However, inasmuch as each law is meant to address specific situations, there runs the risk of one law negating the positive effects of another. Existing laws and regulations also need to be studied and their proper place in the

scheme of competition policy determined. Since some of these laws are penal in nature, the quantum of evidence required so that the case may prosper, i.e., proof beyond reasonable doubt, is difficult to obtain. In addition, the witnesses and/or aggrieved parties, because of the long tedious legal processes involved, are themselves not interested in putting the perpetrators behind bars. Rather, they are more interested in obtaining an injunction or cease and desist orders. Moreover, fines are inadequate to deter would-be criminals (Khemani 1996). An administrative enforcement mechanism that can be implemented faster, with hefty fines as penalties for unfair competition, would be more effective. Recommendations for Philippine Anti-Trust Policy and Regulations page 17 of 53 Although beyond the scope of this article, it must be pointed out that in addition to studying the laws that directly bear on competition and competition policy, it is indispensable to consider the other laws which bear on economic development as these also deal with the elements of competition policy. Lack of jurisprudence on competition The judiciary has scarcely had the opportunity to pass upon the proper application of the various laws on competition, partly due to lack of enforcement. The silence or ambiguities in these laws have thus remained. This lack of guidance has discouraged full implementation. Other Considerations There are other considerations - a few problem areas that must be addressed so that this whole process of formulating a strategy for the introduction of a new regulatory

system in the Philippines will not be a futile exercise. Political capacity With major powerful economic interests involved and entrenched, the development of a comprehensive competition policy to guide future economic regulation in the Philippines will definitely run into serious political obstacles if such interests are opposed. The accumulation of rents through monopolies over resources, factors of production, and channels for economic activity goes back centuries to the colonial periods. Political capacity is intricately entwined with financial capacity, public support, and relative autonomy from pressures and influence of vested interest groups. Budgetary constraints Although government agencies may have relatively large budgets, the amount of these resources compared to those at the disposal of vested interests for the purpose of obstructing reform, appear quite meager. It is also important to note that the budget is essentially controlled by Congress and may be withheld from agencies involved in the reform effort. Technical capacity Most officials in the bureaucracy, as well as politicians, nongovernment organization (NGO) members, and consumers still lack technical knowledge in competition policy. The same is true for bureaucrats involved in the enforcement of fair trade and those who could potentially be involved in competition regulation. A number of officials of the Tariff Commission, Department of Trade and Industry, and the National

Economic Development Authority, have been attending various seminars and workshops on competition policy, but all still lack the practical experience. Recommendations for Philippine Anti-Trust Policy and Regulations page 18 of 53 Management constraints Strict rules on the management of government agencies and the allocation of agency resources severely limit the organizational capability of these agencies. This makes it difficult for an agency to institute internal innovations and reforms and react swiftly and flexibly to various external situations. Thus, government agencies are rendered ineffective and anti-competitive, especially when compared to private corporations. Proper compensation Finally, low salary scales have a detrimental effect on morale in the bureaucracy. It explains why the agencies are unable to attract and maintain the best graduates from the best schools. It also explains the relatively poor performance of agencies vis--vis their private sector counterparts. Finally, low levels of compensation render government officials and employees highly vulnerable to corruption and undue influence by vested interests. In fine, the organizational capability assessment may put into question the feasibility of the initiative to develop and enforce anti-trust measures. However, it is necessary at this point to take stock of the different obstacles and threats this endeavor faces, as well as of the actual capabilities of the key actors and decision makers. This may then pave the way for the formulation of a more realistic strategy for implementation.

There may be a need to rethink the participation of the various key players in the process, as well as the timing and sequencing of measures. Ultimately, this initiative is still the most logical next step in the struggle for the economic renewal of the Philippines. If the obstacles appear daunting, this should only strengthen the resolve to push this initiative forward in the most strategic manner possible. The Next Steps The above assessment of anti-trust regulation and competition promotion in the Philippines does yield disappointing results. Competition is undoubtedly an integral component of a functioning market economy. Indeed, for a society to reap the benefits of wealth creation, wealth distribution and the other major objectives of competition, the state must ensure that market forces are constantly at play within an economy. During the administration of President Ramos, the Philippine government made pronouncements about its adherence to a modern capitalist market system. Constitution The Philippine creative and

clearly declares that it is state policy to protect and promote competition. However, Philippine political and economic histories paint a totally different picture. Even before the creation of the modern Philippine state, the rule has actually been to prevent and destroy competition in order to protect the dominant political and economic elite of the country. In key industries and services, monopolies and cartels have been the standard vehicles for wealth creation. Hence, laws and regulations were structured in such a way that competition could never flourish. On paper, there is an Recommendations for Philippine Anti-Trust Policy and Regulations page 19 of 53

existing legal and regulatory system for promoting competition in this country. Unfortunately, it has proven to be completely ineffective in meeting its stated objectives. The Philippines has yet to craft a truly effective legal and regulatory framework for enforcing competition in the economy. How such a framework is to shape up will depend on the design of a simple and enforceable model and a careful consideration of the political economy realities of this country. Recommendations for a New Legal and Regulatory Framework In a world that is increasingly integrating economically and adhering to marketbased rules and principles, a rational and well-articulated framework for competitionbased economic regulation becomes an indispensable developmental tool for all countries. Recent international and regional developments indicate a pressing need for these new regulatory frameworks in developing and developed countries alike. The controversy and confusion surrounding the recent WTO ministerial conference highlight the urgency for WTO member countries to prepare their respective economic systems for competition in a so-called "Global Economy." This adjustment process includes the introduction of new frameworks for economic regulation which prepare firms and industries for vigorous international competition. In fact, a very important agenda item is the issue of trade and competition policy. Although this topic has been the subject of much controversy due largely to the differences of opinion between the United States and the European Union on the treatment of competition policy within the multilateral trading system. Nevertheless, its inclusion as a topic for discussion in the WTO, as well as in other international institutions such as the OECD

and the World Bank, underscores its crucial role in international economic relations and development. The "shocks" that the financial systems of the East Asian economies suffered illustrated the existing regulatory frameworks lack of responsiveness and relevance to international economic realities. The Asian financial crisis of 1997 was in fact a result of this fundamental conflict. Although certain countries, such as Malaysia and the Philippines, chose to impose restrictions on market-based flows of capital and goods, many countries across the region, such as Thailand, chose to review their antiquated economic regulations with the intention of amending and modernizing them. similar If a

crisis is to be prevented in the future, then Asian economies would be better advised to choose the latter approach. Certainly, the Philippines was not spared the negative effects of the Asian financial crisis, despite claims to the contrary. Many firms and industries did suffer from the drastic fluctuations of an unstable currency. Unfortunately, rather than accepting the crisis as a result of market forces conflicting with anti-competitive economic regulations, these firms even cited the crisis as justification calls to impose economic controls and trade barriers. For example, the Philippine government has made moves to increase trade protection for its textile, petrochemical, basic steel, and basic agricultural sectors. Such Recommendations for Philippine Anti-Trust Policy and Regulations page 20 of 53 efforts only aggravate monopoly situations already prevailing in these sectors. What is

most disturbing about this situation is that it reveals a highly inconsistent approach in economic development policy and even a reversal of the Philippine government pronouncements about adhering to open markets, liberalization and competition. The problem is that the Philippines, despite the existence of numerous laws and regulations dealing with competition, really lacks a clear, coherent, comprehensive and enforceable legal and regulatory framework for anti-trust enforcement and the protection of competition. Therefore, there is still a need to propose a more effective framework for anti-trust regulation in this country. Such a framework should first lay down the basic policy objectives and principles, and then spell out the basic structure for regulation. Key Features of a Philippine anti-Trust or Competition Law As explained earlier, Philippine laws and regulations bearing on competition are actually numerous and varied. However, there still remains a need to enact an overall law on competition, particularly a comprehensive anti-trust or competition legislation. Some key features have been suggested for such legislation, namely: 1. 2. 3. 4. 5. Competition law should focus on the actual and/or potential business conduct of firms in a given market, and not on the absolute or relative size of firms. It should look at the business conduct of firms and on the

business environment in which the firms operate. Competition law must be effectively harmonized and linked with other government policies. Promoting competition in the business environment constrains firms' anti-competitive behavior and also inculcates sound business practices and ethics. Competition law should be a law of general application, addressing all sectors of the economy. Exemptions from its application may be allowed if they do not limit competition, are based on sound economic principles, and are aimed at facilitating legitimate economic activity. Competition law should contain provisions explicitly prohibiting business practices that are clearly against economic efficiency and consumer welfare, such as price fixing, bid rigging, restriction of output and market shares and allocation of geographic markets and customers which should be deemed illegal per se and subject to criminal law and severe penalties. Competition law should also provide for a "rule of reason" approach with respect to horizontal and vertical mergers, specialization agreements, joint ventures, vertical manufacturing and wholesale, retail distribution arrangements. Prior notification to, and approval by, the concerned agency of such business arrangements is recommended but only with respect to largest transactions, taking into consideration size thresholds in terms of market share, assets, sales and/or employment of parties involved (Khemani 1996). Ultimately, these measures should seek to establish a new national economic order with the private sector as the primary engine of growth and development, market forces as the determinants of prices and wages, competition as the principal means of economic, Recommendations for Philippine Anti-Trust Policy and Regulations

page 21 of 53 political and social control and discipline, consumer welfare, employment and income expansion, and economic efficiency as the main benchmark. Philippine anti-trust laws have been largely ineffective because their enforcement is vested in different agencies. This breeds confusion, non-coordination and conflicts. It is not uncommon for benefits from enforcement in one area to be negated by adverse effects from enforcement elsewhere. The effective implementation and enforcement of anti-competition laws should be vested in a centralized agency with sufficient powers to oversee and monitor the competitive climate in the different sectors of the economy, and to formulate and recommend such measures as would ensure the maintenance of the competition in the Philippine domestic market and as would anticipate developments in the international market. Reality Check Given the central importance of competition in economic development, as well as the basic lack of capacity for enforcing competition in the Philippines, there is a need to engage in a general overhaul of the legal and regulatory system. Ideally, therefore, the introduction of true competition policy in this country should be done in a centralized and comprehensive manner. comprehensive This would necessitate the introduction of a new

law that outlines the anti-competitive structures and behavior which need to be curtailed and the procedures for enforcing these, as well the creation of a new competition agency to implement the new law.

The prime objective of this special reform effort is to institutionalize a "competition culture" in the Philippines. promotes If society as a whole accepts and even

competition as an integral part of economic reality, then anti-trust regulation can actually become self-sustaining. However, it will still require a legal and regulatory framework in which to operate. Furthermore, this framework will have to play that central role in an over-arching competition policy for the whole economy. This framework will have to be imbued with the level of importance that would command the respect of the highest leadership as official state policy. First Option: A Comprehensive Approach Therefore, the first option in introducing an effective legal and regulatory framework for anti-trust enforcement is the passage of a new law which is comprehensive in scope and central to economic policy. This new law will have to contain all the major provisions governing the conduct of anti-trust enforcement and will, in effect, modify the manner in which the government regulates the economic activities in the Philippines. The new law will centralize the different interventions of the government which relate to competition policy. The entity could be called the Philippine Trade Commission or the Philippine Competition Commission, composed of members with varied backgrounds in laws, economics, finance and various fields of industry and business. In determining the Recommendations for Philippine Anti-Trust Policy and Regulations page 22 of 53

nature, powers, functions and duties of the Commission, it is proposed that the following guiding principles (Khemani 1996) be considered: 1. 2. 3. 4. 5. 6. The Commission should be independent and insulated from political interference, or influence. The investigation, prosecution and adjudication functions should be separate. A system of checks and balances with appropriate rights of appeal and review of decisions and facts on legal and economic grounds should be provided. The Commission should guarantee the expeditious resolutions of cases and related matter. The proceedings should be transparent and acceptable to all affected parties. The Commission should have a statutory role in participating, formulating and commenting on government economic and regulatory policies impacting on competition in the market place. The Commission should consistently and fairly implement or apply all competition laws in addressing different types of restrictive business practices. The various draft bills, like the proposed version suggested above, take this

comprehensive and centralized approach. However, these proposed laws take very different approaches to applying the basic provisions of an anti-trust and competition law outlined above. The different draft bills have certain similarities to the proposed law in this article. There are also certain significant differences. Many of these are actually combinations of provisions copied from the laws in other countries. The problem is that there is really no single model that will ensure success in the Philippines. That is why it is better to keep the proposed law as simple as possible to allow room for evolution within the unique context of the Philippine economy. The law proposed under this paper is actually drawn from certain basic principles and provisions discussed above and includes provisions on defining the relevant market, monopolies and abuse of dominant market position, horizontal agreements, mergers, other unfair trade practices, and the administrative mechanism for enforcement. One unique feature of this proposed law is that, instead of creating a new antitrust/competition agency from scratch, the existing Tariff Commission is converted into a Philippine Trade Commission or Fair Trade Commission. Such measure offers several advantages. First of all, this will address the problem of the current government policy that no new agencies or bodies can be created unless it also involves the abolition of existing ones. Second, to a certain extent, the problem of capability may be partially addressed since the research and investigation personnel of the Tariff Commission are already involved in studying market access issues, defining relevant markets and analyzing industry structure. formulation Finally, it will bring under one roof trade policy

and international fair trade enforcement (trade measures) and competition analysis and enforcement and consumer welfare promotion, which are all closely related. Recommendations for Philippine Anti-Trust Policy and Regulations page 23 of 53 Second Option: A Piecemeal Approach Unfortunately, the realities of political economy, as well as the existence of the administrative and comprehensive other problems outlined above make the passage of a

anti-trust or competition law in the near future rather difficult. Although it is the more ideal approach, the comprehensiveness of the proposed new law may make it difficult to understand and appreciate, attract all kinds of political interventions, give rise to various obstacles to its timely passage, and render its actual implementation unwieldy. First of all, the proposed law may be difficult to understand and appreciate because of its more technical provisions. It may also be hard to absorb in its entirety. Potential supporters in the government, business sector, and civil society may thus not be able to rise in its defense against those who would oppose it. Secondly, a proposed law of this nature would attract much public attention, and those sectors opposed to its passage might conspire together to ensure its non-passage or delay. Alternatively, they may intervene to insert exceptions or other onerous provisions. attention Thirdly, such public

and political interventions would only lead to other obstacles lo the timely passage of the new law, such as endless public debates and media hype. Finally, a comprehensive

approach to anti-trust/competition law enforcement, especially if it involves the creation of a new agency or institution, may run into significant implementation problems. As discussed above, the lack of capacity on the part of our bureaucracy will most probably present the important challenge. In consideration of all these factors, the comprehensive approach, although ideal , may not be the most practical. This means that we need to explore other possibilities if only to ensure that this country still introduces some form of improved legal and regulatory framework for antitrust enforcement. One other possibility is to approach the problem in a more "piecemeal" manner. For example, rather than introduce a single comprehensive law, the proposed law could be divided into components and introduced as separate draft bills. The portion outlining the list of anti-trust violations may be separated from the list of remedies and the portion creating a new anti-trust body. these The technical details or implementing

laws could then be contained in rules and regulations. Also, rather than introducing completely new legislation, the government could instead introduce only amendatory legislation and revise various existing laws relating to anti-trust/competition. The main objective would still be to operationalize the Constitutional provisions promoting competition. The following existing laws could be amended for more effective anti-trust enforcement: 1. 2. 3.

Revised Penal Code: shifting the burden of proof from "beyond reasonable doubt" to a less strict "preponderance of evidence," increasing the penalties for violations, and providing the administrative mechanism for effective enforcement Civil Code: providing greater ease for an aggrieved party to file a civil case and collect damages from parties guilty of anti-competitive practices Consumer Act: providing the legal mechanism for consumers to file cases for anti-competitive practices Recommendations for Philippine Anti-Trust Policy and Regulations page 24 of 53 4. Tariff and Customs Code: amending the charter of the Tariff Commission to convert it into a Philippine Trade Commission or some other anti-trust body. These are merely examples of existing laws which could be amended as part of a piecemeal introduction of an effective, improved legal and regulatory framework for antitrust enforcement. There are many other laws and also executive issuances which will have to be reviewed and amended. Special mention should also be made of the role of foreign investments in competition enforcement. have Opening economic sectors to increased investment flows

the effect of creating more dynamic operating environments for businesses, wherein technology transfers and innovation are encouraged. Investment liberalization may also have the effect of providing local economic sectors with access to new and larger regional and global markets. passage Therefore, this piecemeal approach should also include the

of laws and issuance of regulations which encourage the entry of more foreign

investments. There may be many different approaches to achieving our main objectives. What this article attempts to present are the features of an effective legal and regulatory framework for anti-trust enforcement. indeed a It should also be emphasized that there is Competition policy is an essential

need for such a framework for the Philippines. element

for economic reform in this country. The lack of competition is precisely one of the most significant reasons for our persistent underdevepment. Therefore, one of the most important roles of government in promoting more equitable development is enforcing and preserving competition. The inadequacy of mere market-opening measures has been highlighted. In the end, the government will have to intervene to enforce competition, and this requires effective laws and regulations. whether The passage of new legislation,

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page 26 of 53 SGV Consulting, Philippines. 1992. Barriers To Entry Study, Final Report 1. Study prepared for the United States Agency for International Development, April 1992, Philippines. Swann, D. 1979. Competition and Consumer Protection. London, England. The Pocket Oxford Dictionary of Current English. 8th ed. 1992. Oxford, England: Clarendon Press. Varian, Hal R. 1993 Intermediate Microeconomics: A Modem Approach (3rd edition). New York: W.W. Norton and Company, 1993. Whish, Richard, 1993 Competition Law (3rd edition). London: Butterworth & Co (Publishers) Ltd World Bank (WB) and OECD. 1998. A Framework for the Design and Implementation of Competition Law and Policy. World Bank and OECD : Washington. D.C. Articles Baumol, Panzar and Willing. 1982. Contestable Markets and the Theory of Industry Structure. Bailey. 1981. Contestability and the Design of Regulatory and AntiTrust Policy. 71 Am EC Rev 178-183. Campos, R.A.O. and A.L. Arlegui. 1993. Toward A Pro-Competition And Pro-Consumer Anti-Trust Policy. Economic Policy Paper 9 Center for Research and Communication, Philippines. Clark, 1940. Toward a Concept of Workable Competition 30:241-256. Dejillas, L.J. 1996. Competition Policy and the Market Economy: The Philippine Experience, in Economic Policy and the Market Economy - The Philippine Setting. Leopoldo J. Dejillas, ed., 1996. (Institute for Development Research and Studies [IDRS] Konrad Adenauer Foundation [KAF], Makati City, Philippines) 190p.

Janow, M.E. 1995. Public and Private Restraints that Limit Access to Markets. Jara, M.S. 1996. PLOT Commits 2 Interim Solutions to "link" Problems. Business World. 22 July 1996:8 Khemani, R.S. 1996. The Role and Importance of Competition Law and Policy in the ASEAN Region. Paper presented at a conference organized by the World Bank. March 1996. Jakarta, Indonesia. Lazatin, V 1994. Outline of Competition Law Enforcement in the Philippines. Recommendations for Philippine Anti-Trust Policy and Regulations page 27 of 53 Meyerman, O.E. and Cuevas, M.A. 1998. Competition Policy in a Global Economy - An Interpretive Summary. The International Bank for Reconstruction and Development]The World Bank, Washington, D.C., U.S.A. Sosmea, G. Streamlining the Bureaucracy. 1994. Konrad Adenauer Stiftung (Philippines) Occasional Papers 55. Vol. U No. 2. Stockmann, K. 1991. The Function of Competition in a Social Market Economy. In Social Market Economy: An Economic System for Developing Countries 27. edited by Winfried Jung. Logos Publications, Inc. Vergara, B.E, Victor. Anti-trust Legislation in the House of Representatives. Villanueva, O.J. 1996. PLDT to Address Voice Channel Problem of ICC. The Manila Chronicle. 22 July 1996:11. Watson, P. 1996. Practical Implications of the Post-GATT Order: Considerations for the Future Multilateral Agenda. In The World Trade Congress. Singapore. Constitution and Statutes Philippine Constitution Act No. 3815 (1930), Revised Penal Code. Republic Act No. 7394 (1932), Consumer Act of the Philippines.

Republic Act No. 337 (1948), An Act Regulating Banks and Banking Institutions and for Other Purposes (General Banking Act). Republic Act No. 386 (1949), An Act to Ordain and Institute the Civil Code of the Philippines. Republic Act No. 1180 1954), An Act to Regulate the Retail Business. Republic Act No. 3247 (1961), An Act to Prohibit Monopolies and Combinations in Restraint of Trade. Presidential Decree No. 442 (1974), Labor Code of the Philippines. Batas Pambansa Bilang 68 (1980), Corporation Code of the Philippines. Batas Pambansa Bilang 178 (1982), Revised Securities Act. Republic Act No. 6938 (1990), An Act to Ordain a Cooperative Code of the Philippines. Recommendations for Philippine Anti-Trust Policy and Regulations page 28 of 53 Republic Act No. 7042 (1991), An Act to Promote Foreign Investments, Prescribe the Procedures for Registering Enterprises Doing Business in the Philippines, and for Other Purposes (Foreign Investments Act of 1991). Republic Act No. 7160 (1991), Local Government Code of 1991. Republic Act No. 7181 (1991), An Act Extending the Life of the Committee on Privatization and the Asset Privatization Trust. Republic Act No. 7581 (1991). An Act Providing Protection to Consumers by Stabilizing the Prices of Basic Necessities and Prime Commodities and by Prescribing Measures Against Undue Price Increases During Emergency Situations and Like Occasions (Price Act) Republic Act No. 7227 (1992), An Act Accelerating the Conversion other Productive Uses, Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds Therefor, and for Other Purposes (Bases Conversion Act).

Republic Act No. 7661 (1992), An Act Amending Republic Act No. 7181entitled "An Act Extending the Life of the Committee on Privatization and Asset Privatization Trust." Republic Act No. 7648 (1993), An Act Prescribing Urgent Related Measures Necessary and Proper to Effectively Address the Electric Power Crisis and for Other Purposes. Republic Act No. 7650 (1993), An Act Repealing Section 1404 and Amending Sections 1401 and 1403 of the Tariff and Customs Code of the Philippines, as amended. Relative to the Physical Examination of Imported Articles. Republic Act No. 7653 (1993), The New Central Bank Act. Republic Act No. 7721 (1994), An Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines and for Other Purposes. Republic Act No. 7844 (1994), An Act to Develop Exports as a Key Towards the Achievement of the National Goals Towards the Year 2000 (Exports Development Act of 1994). Republic Act No. 7886 (1994), An Act Extending the Term of the Committee on Privatization and the Asset Privatization Trust Amending for the Purpose of Republic Act Numbered Seven Thousand Six Hundred Sixty-One. Republic Act No. 7888 (1995), An Act to Amend Article 7 (13) of Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987. Republic Act No. 7916 (1995), An Act Providing for the Legal Framework and Mechanism for the Creation. Operation, Administration, and Coordination of Special Economic Zones in the Philippines, Creating for this Recommendations for Philippine Anti-Trust Policy and Regulations page 29 of 53 Philippine Economic Zone Authority (PEZA) and for Other Purposes (the Special Purpose the

Economic Zone Act of 1995). Republic Act No. 7918 (1995), An Act Amending Article 39. Title m of Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, as amended. Republic Act No. 7922 (1995), An Act Establishing a Special Economic Zone and Free Port in the Municipality of Sta. Ana and Other NeigHouse Bill No.oring Islands in the Municipality of Aparri, Province of Cagayan, Providing Funds therefor, and for Other Purposes. Republic Act No. 7925 (1995), An Act to Promote and Govern the Development of Philippine Telecommunications and the Delivery of Public Telecommunication Services (Public Telecommunications Policy Act of the Philippines). Republic Act No. 8178 (1996). An Act Replacing Quantitative Imports Restrictions on Agricultural Products Except Rice, with Tariffs, Creating the Agricultural Competitiveness Enhancement Fund, and for Other Purposes. Republic Act No. 8179 (1996), An Act to Further Liberalize Foreign Investments, Amending for the Purpose Republic Act No. 7042, and for Other Purposes. Republic Act No. 8180 (1996), An Act Deregulating the Downstream Oil Industry, and for Other Purposes. Republic Act No. 8293 (1997), The Intellectual Property Code of the Philippines. Republic Act No. 8435 (1997), An Act Prescribing Urgent Related Measures to Modernize the Agriculture and Fisheries Sectors of the Country in Order to Enhance their Profitability, and Prepare Said Sectors for the Challenges of Globalization through an Adequate, Focused and Rational Delivery of Necessary Support Services, Appropriating Funds Therefor and for other Purposes Republic Act No. 8751 (1999), An Act Strengthening the Mechanisms for the Imposition

of Countervailing Duties on Imported Subsidized Products, Commodities or Articles of Commerce in order to Protect Domestic Industries from Unfair Trade Competition, Amending for the Purpose Section 302, Part 2, Title II, Book I of Presidential Decree No. 1464, otherwise known as the Tariff and Customs Code of the Philippines, as amended Republic Act No. 8752 (1999), An Act Providing the Rules for the Imposition of an AntiDumping Duty, Amending for the Purpose Section 301, Part 2, Title II, Book I of the Tariff and Customs Code of the Philippines, as amended by Republic Act No. 7843, and for other purposes Republic Act No. 8479 (1998), An Act Deregulating the Downstream Oil Industry, and for other Purposes Recommendations for Philippine Anti-Trust Policy and Regulations page 30 of 53 Republic Act No. 8799 (2000), The Securities Regulation Code Cases G.R. No. L-10029, People of the Philippines vs. Florencio Bautista, et al., 21 August 1959 G.R. No. L-14859, Macario King, et al. vs. Pedro S. Hernaez, et al., 31 March 1962 G.R. No. L-19638, Filipinas Compaia De Seguros, et al. vs. Hon. Francisco Y. Mandanas, et al., 20 June 1966 G.R. No. L-45911, 89 SCRA 339 (1979). Matsushita Electric Industrial Co. Ltd., et al. v. Zenith Radio Corporation, et al. 475 US 574 (1986) G.R. No. 96516, Jesus C. Estanislao, in his capacity as the Secretary of Finance vs. Hon. Amado Costales, et al., 8 May 1991 G.R. Nos. 124360 and 127867, Decision En Banc dated 05 November 1997.

G.R. No. 118295, En Banc Decision dated 02 May 1997 (272 SCRA 18). G.R. Nos. 124360 and 127867, Decision En Banc dated 05 November 1997. G.R. Nos. 14360 and 127867, Decision En Banc dated 03 December 1997 on the Motion for Reconsideration, citing the State of the Nation Address of President Fidel V. Ramos, 3rd Session of the Ninth Congress, 25 July 1994. G.R. Nos. 14360 and 127867, Decision En Banc dated 03 December 1997 on the Motion for Reconsideration. G.R. No. 110526, Association Of Philippine Coconut Desiccators vs. Philippine Coconut Authority, 10 February 1998 G.R. No. 132451, Congressman Enrique T. Garcia vs. Hon. Renato C. Corona, et al., 17 December 1999 Case 48/69 ICI vs Commission (Dyestuffs case 1972) ECR 619 Case 26/75 General Motors Continental NV v Commission [1976] ECR 1367. Case 107/82 AEG-Telefunken v. Commission [1983] ECR 3151. Case T-7/89 Re Polypropylene Cartel SA Hercules (1991) ECR H-1711 Case T-7/89 Re Polypropylene Cartel SA Hercules (1991) Recommendations for Philippine Anti-Trust Policy and Regulations page 31 of 53 Case T-ll/89 Shell v. Commission [1992] ECR H-757. Recommendations for Philippine Anti-Trust Policy and Regulations page 32 of 53 APPENDIX 1: Philippine Laws and Regulations Affecting Competition Constitution and Statutes Philippine Constitution ECR H-1711

Act No. 3815 (1930), Revised Penal Code. Republic Act No. 7394 (1932), Consumer Act of the Philippines. Commonwealth Act No. 146 (1936), An Act to Reorganize the Public Service Commission, Prescribe its Powers, Duties. Define and Regulate Public Services. Provide and Fix the Rates and Quota of Expenses to be Paid by the Same, and for Other Purposes. Commonwealth Act No. 541 (1940). An Act to Regulate the Awarding of Contracts for the Construction or Repair of Public Works. Republic Act No. 337 (1948), An Act Regulating Banks and Banking Institutions and for Other Purposes (General Banking Act). Republic Act No. 386 (1949), An Act to Ordain and Institute the Civil Code of the Philippines. Republic Act No. 529 (1950), An Act to Assure Uniform Value to Philippine Coin and Currency. Republic Act No. 3018 (1960), An Act Limiting the Right to Engage in the Rice and Corn Industry to Citizens of the Philippines, and for Other Purposes. Republic Act No. 3247 (1961), An Act to Prohibit Monopolies and Combinations in Restraint of Trade. Republic Act No. 4566 (1965). An Act Creating the Philippine Licensing Board for Contractors. Prescribing its Powers. Duties and Functions. Providing Funds therefor, and for Other Purposes (Contractors' License Law). Republic Act No. 5487 (1969), An Act to Regulate the Organization and Operation of Private Detective, Watchmen or Security Guard Agencies. Republic Act No. 5980 (1969), An Act Regulating the Organization and Operation of Financing Companies.

Presidential Decree No. 194 (1973), Authorizing Aliens, as well as Associations, Corporations or Partnerships Owned in Whole or in Part by Foreigners to Engage in the Rice and Corn Industry, and for Other Purposes. Recommendations for Philippine Anti-Trust Policy and Regulations page 33 of 53 Presidential Decree No. 442 (1974), Labor Code of the Philippines. Batas Pambansa Bilang 68 (1980). Corporation Code of the Philippines. Batas Pambansa Bilang 178 (1982), Revised Securities Act. Presidential Decree No. 1853 (1982). Requiring Deposits of Duties at the Time of Opening of Letters of Credit Covering Imports and for Other Purposes. Republic Act No. 6938 (1990), An Act _______________________________ Republic Act No. 7042 (1991), An Act to Promote Foreign Investments, Prescribe the Procedures for Registering Enterprises Doing Business in the Philippines, and for Other Purposes (Foreign Investments Act of 1991). Republic Act No. 7076 (1991). An Act Creating a People's Small-scale Mining Program and for Other Purposes (People's Small-scale Mining Act of 1991). Republic Act No. 7160 (1991), Local Government Code of 1991. Republic Act No. 7181 (1991), An Act Extending the Life of the Committee on Privatization and the Asset Privatization Trust. Republic Act No. 7581 (1991), An Act Providing Protection to Consumers by Stabilizing the Prices of Basic Necessities and Prime Commodities and by Prescribing Measures Against Undue Price Increases During Emergency Situations and Like Occasions (Price Act). Republic Act No. 7227 (1992). An Act Accelerating the Conversion of Military Reservations into other Productive Uses, Creating the Bases Conversion and Development Authority for this Purpose. Providing Funds Therefor, and for Other

Purposes (Bases Conversion Act). Republic Act No. 7642 (1992), An Act Increasing the Penalties for Tax Evasion, Amending for this Purpose the Pertinent Sections of the National Internal Revenue Code, as Amended. Republic Act No. 7661 (1992), An Act Amending Republic Act No. 7181entitled "An Act Extending the Life of the Committee on Privatization and Asset Privatization Trust." Republic Act No. 7648 (1993), An Act Prescribing Urgent Related Measures Necessary and Proper to Effectively Address the Electric Power Crisis and for Other Purposes. Republic Act No. 7650 (1993), An Act Repealing Section 1404 and Amending Sections 1401 and 1403 of the Tariff and Customs Code of the Philippines, as amended. Relative to the Physical Examination of Imported Articles. Recommendations for Philippine Anti-Trust Policy and Regulations page 34 of 53 Republic Act No. 7652 (1993), An Act allowing the long-term Lease of Private Lands by Foreign Investors (Investors' Lease Act). Republic Act No. 7653 (1993), The New Central Bank Act. Republic Act No. 7660 (1993), An Act Rationalizing Further the Structure and Administration of the Documentary Stamp Tax. Amending for the Purpose Certain Provisions of the National Internal Revenue Code, as Amended, Allocating Funds for Specific Programs and for Other Purposes. Republic Act No. 7691 (1994), An Act expanding the jurisdiction of the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts, Amending for this Purpose Batas Pambansa Big. 129, Otherwise Known as the "Judiciary Reorganization Act of 1980."

Republic Act No. 7700 (1994). An Act Providing for Concurrent Jurisdiction Between and Among the First, Second and Third Divisions of the National Labor Relations Commission to Further Ensure Speedy Disposition of Cases, Amending for this Purpose Article 213 of Presidential Decree No. 442, as Amended, and for Other Purposes. Republic Act No. 7717 (1994), An Act Imposing a Tax on the Sale, Barter or Exchange of Shares of Stock Listed and Traded Through the Local Stock Exchange or Through Initial Public Offering, Amending for the Purpose of the National Internal Revenue Code, as Amended, by Inserting a New Section and Repealing Certain Sub-sections Thereof. Republic Act No. 7716 (1994), An Act Restructuring the Value-Added Tax (VAT) System, Widening its Tax Base and Enhancing its Administration, and for these Purposes Amending and Repealing the Relevant Provisions of the National Internal Revenue Code, as Amended, and for Other Purposes. Republic Act No. 7718 (1994), An Act Amending Certain Sections of Republic Act No. 6957, entitled "An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by Private Sector, and for Other Purposes. Republic Act No. 7721 (1994), An Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines and for Other Purposes. Republic Act No. 7844 (1994). An Act to Develop Exports as a Key Towards the Achievement of the National Goals Towards the Year 2000 (Exports Development Act of 1994). Republic Act No. 7886 (1994), An Act Extending the Term of the Committee on Privatization and the Asset Privatization Trust Amending for the Purpose of Republic Act Numbered Seven Thousand Six Hundred Sixty-One.

Republic Act No. 7888 (1995), An Act to Amend Article 7 (13) of Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987. Recommendations for Philippine Anti-Trust Policy and Regulations page 35 of 53 Republic Act No. 7903 (1995). An Act Creating a Special Economic Zone and Free Port in the City of Zamboanga Creating for this Purpose the Zamboanga City Special Economic Zone Authority, Appropriating Funds therefor and for Other Purposes (Zamboanga City Special Economic Zone Act of 1995). Republic Act No. 7909 (1995), An Act Granting a Franchise to Pacific Airways Corporation to Establish and Maintain Rural Air Transport System and Allied Services in the Philippines. Republic Act No. 7916 (1995), An Act Providing for the Legal Framework and Mechanism for the Creation, Operation. Administration, and Coordination of Special Economic Zones in the Philippines, Creating for this Purpose the Philippine Economic Zone Authority (PEZA) and for Other Purposes (the Special Economic Zone Act of 1995). Republic Act No. 7918 (1995), An Act Amending Article 39, Title HI of Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, as amended. Republic Act No. 7922 (1995), An Act Establishing a Special Economic Zone and Free Port in the Municipality of Sta. Ana and Other NeigHouse Bill No.oring Islands in the Municipality of Aparri, Province of Cagayan, Providing Funds therefor, and for Other Purposes. Republic Act No. 7925 (1995). An Act to Promote and Govern the Development of Philippine Telecommunications and the Delivery of Public Telecommunication Services (Public Telecommunications Policy Act of the Philippines).

Republic Act 7942 (1995), An Act Instituting a New System of Mineral resources Exploration, Development, Utilization and Conservation (Philippine Mining Act of 1995). Republic Act No. 7902 (1995), An Act Expanding the Jurisdiction of the Court of Appeals. Amending for the Purpose of Section Nine of Batas Pambansa Big. 129. as amended, known as the Judiciary Reorganization Act of 1980. Republic Act No. 7906 (1995). An Act Providing for the Regulation of the Organization and Operations of Thrift Banks, and for Other Purposes (Thrift Banks Act of 1995). Republic Act No. 7975 (1995). An Act to Strengthen the Functional and Structural Organization of the Sandiganbayan, amending for that purpose Presidential Decree No. 1606, as amended. Republic Act No. 8041 (1995), An Act to Address the National Water Crisis (Water Crisis Act). Republic Act No. 8047 (1995), An Act Providing for the Development of the Book Publishing Industry through the Formulation and Implementation of a National Recommendations for Philippine Anti-Trust Policy and Regulations page 36 of 53 Book Policy and National Book Development Plan (Book Publishing Industry Development Act). Republic Act No. 8103 (1995). An Act Granting a Franchise to All Asia Airlines Co., Inc. to establish and Maintain Air Transportation Services Throughout the Philippines and/or Between the Philippines and Other Countries. Republic Act No. 8178 (1996). An Act Replacing Quantitative Imports Restrictions on Agricultural Products Except Rice, with Tariffs, Creating the Agricultural Competitiveness Enhancement Fund, and for Other Purposes.

Republic Act No. 8179 (1996), An Act to Further Liberalize Foreign Investments, Amending for the Purpose Republic Act No. 7042, and for Other Purposes. Republic Act No. 8180 (1996), An Act Deregulating the Downstream Oil Industry, and for Other Purposes. Republic Act No. 8181 (1996), An Act Changing the Basis of Dutiable Value of Imported Articles Subject to an Ad Valorem Rate of Duty from Home Consumption Value (HCV) to Transaction Value (TV), Amending for the Purpose Section 201 Title 2, Part I pf Presidential Decree No. 1464, otherwise known as the Tariff and Customs Code of the Philippines, as amended, and for other purposes. Republic Act No. 8293 (1997), The Intellectual Property Code of the Philippines. Republic Act No. 8294 (1997), The Tax Reform Act of 1997. Republic Act No. 8751 (1999), An Act Providing the Rules for the Imposition of a Countervailing Duty, Amending for the Purpose Section 302, Part 2, Title II, Book I of the Tariff and Customs Code of the Philippines, as amended, and for other purposes, (Countervailing Duty Act of 1999). Republic Act No. 8752 (1999), An Act Providing for the Rules for the Imposition of an Anti-Dumping Duty, Amending for the Purpose Section 301, Part 2, Title II, Book 1 of the Tariff and Customs Code of the Philippines, as amended by Republic Act No. 7843 and for other purposes (Anti-Dumping Act of 1999) Republic Act No. 8762 (2000), An Act Liberalizing the Retail Trade, Repealing for the Purpose Republic Act No. 1180, as amended, and for other purposes (Retail Trade Liberalization Act of 2000). Executive Orders Executive Order No. 3, Series of 1992, Creating a Presidential Anti-Crime Commission to identify and cause the investigation and prosecution of criminal elements in the

country. Recommendations for Philippine Anti-Trust Policy and Regulations page 37 of 53 Executive Order No. 8, Series of 1992, Restructuring the Rates of Import Duties and Amending the Classification of Certain Articles under Section 104 of the Tariff and Customs Code of 1978, as amended. Executive Order No. 59, Series of 1993, Prescribing the Policy Guidelines for Compulsory Interconnection of Authorized Public Telecommunications Carriers in order to Create a Universally Accessible and Fully Integrated Nationwide Telecommunications Network and thereby Encourage Greater Private Sector Investment in Telecommunications. Executive Order No. 79, Series of 1993, Modifying The Rates of Duty on Certain Imported Articles as provided under the Tariff and Customs Code of 1978, as amended, in order to implement the Minimum 50% Margin of Preference on Certain Products Included in the Brand-To-Brand Completion scheme in the Automotive Industry under the Basic Agreement on ASEAN Industrial Complementation. Executive Order No. 94, Series of 1993, Reducing the Import Duty on Cement Clinker under Section 104 of Presidential Decree No. 1464, otherwise known as the Tariff and Customs Code of 1978. Executive Order No. 98, Series of 1993, Reorganizing the Export and Investment Development Council into the Export Development Council. Executive Order No. 106, Series of 1993, Lifting the Suspension of the Application of the Tariff Concessions Granted by the Philippines on Refractory Bricks under the ASEAN Preferential Trading Arrangements. Executive Order No. 109, Series of 1993, Policy to Improve the Provision of Local

Exchange Carrier Service. Executive Order No. 110, Series of 1993, Strengthening the Export Development Council (EDC) amending for this purpose Executive Order No. 98 to Increase the Government and Private Sectors Members of the Council. Executive Order No. 115, Series of 1993, Increasing the SpUecial Duties on Crude Oil and Oil Products under Section 104 of the Tariff and Customs Code of the Philippines, as amended. Executive Order No. 116, Series of 1993, Amending Section 1 of Executive Order No. 94, dated 01 June 1993. Executive Order No. 145, Series of 1993, Modifying The Rates of Duty on Certain Imported Articles as provided for under the Tariff and Customs Code of 1978, as amended, in order to Implement the 1994 Philippine Schedule of Tariff Reductions on Articles Included in the Accelerated and Normal Programs of the Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade Area (AFTA). Recommendations for Philippine Anti-Trust Policy and Regulations page 38 of 53 Executive Order No. 146, Series of 1993, amending Executive Order No. 43 of 1992, by modifying the margins of the preference and the applicable ASEAN preferential tariffs on certain items included in the coverage thereof. Executive Order No. 147, Series of 1993, Modifying The Rates of Duty on Certain Imported Articles as provided under the Tariff and Customs Code of 1978, as amended, in order to Implement the 10% Margin of Preference (MOP) Granted by the Philippines under the Agreement on the Global System of Trade Preferences among Developing Countries as set forth in the Philippine Schedule of Concessions Annexed to the Agreement.

Executive Order No. 148, Series of 1993, Modifying the Rates of Import Duty on Certain Imported Articles as provided under Presidential Decree No. 1464, as amended, otherwise known as the Tariff and Customs Code of the Philippines of 1978. Executive Order No. 3, Series of 1992, Creating a Presidential Anti-Crime Commission to identify and cause the investigation and prosecution of criminal elements in the country. Executive Order No. 8, Series of 1992, Restructuring the Rates of Import Duties and Amending the Classification of Certain Articles under Section 104 of the Tariff and Customs Code of 1978, as amended. Executive Order No. 59, Series of 1993, Prescribing the Policy Guidelines for Compulsory Interconnection of Authorized Public Telecommunications Carriers in order to Create a Universally Accessible and Fully Integrated Nationwide Telecommunications Network and thereby Encourage Greater Private Sector Investment in Telecommunications. Executive Order No. 79, Series of 1993, Modifying The Rates of Duty on Certain Imported Articles as provided under the Tariff and Customs Code of 1978, as amended, in order to implement the Minimum 50% Margin of Preference on Certain Products Included in the Brand-To-Brand Completion scheme in the Automotive Industry under the Basic Agreement on ASEAN Industrial Complementation. Executive Order No. 94, Series of 1993, Reducing the Import Duty on Cement Clinker under Section 104 of Presidential Decree No. 1464, otherwise known as the Tariff and Customs Code of 1978. Executive Order No. 98, Series of 1993, Reorganizing the Export and Investment Development Council into the Export Development Council.

Executive Order No. 106, Series of 1993, Lifting the Suspension of the Application of the Tariff Concessions Granted by the Philippines on Refractory Bricks under the ASEAN Preferential Trading Arrangements. Executive Order No. 109, Series of 1993, Policy to Improve the Provision of Local Exchange Carrier Service. Recommendations for Philippine Anti-Trust Policy and Regulations page 39 of 53 Executive Order No. 110, Series of 1993, Strengthening the Export Development Council (EDC) amending for this purpose Executive Order No. 98 to Increase the Government and Private Sectors Members of the Council. Executive Order No. 115, Series of 1993, Increasing the Special Duties on Crude Oil and Oil Products under Section 104 of the Tariff and Customs Code of the Philippines, as amended. Executive Order No. 116, Series of 1993, Amending Section 1 of Executive Order No. 94, dated 01 June 1993. Executive Order No. 145, Series of 1993, Modifying The Rates of Duty on Certain Imported Articles as provided for under the Tariff and Customs Code of 1978, as amended, in order to Implement the 1994 Philippine Schedule of Tariff Reductions on Articles Included in the Accelerated and Normal Programs of the Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade Area (AFTA). Executive Order No. 146, Series of 1993, amending Executive Order No. 43 of 1992, by modifying the margins of the preference and the applicable ASEAN preferential tariffs on certain items included in the coverage thereof. Executive Order No. 147, Series of 1993, Modifying The Rates of Duty on Certain

Imported Articles as provided under the Tariff and Customs Code of 1978, as amended, in order to Implement the 10% Margin of Preference (MOP) Granted by the Philippines under the Agreement on the Global System of Trade Preferences among Developing Countries as set forth in the Philippine Schedule of Concessions Annexed to the Agreement. Executive Order No. 148, Series of 1993, Modifying the Rates of Import Duty on Certain Imported Articles as provided under Presidential Decree No. 1464, as amended, otherwise known as the Tariff and Customs Code of the Philippines of 1978. Executive Order No. 153, Series of 1994, Modifying the Rates of Duty on Certain Imported Articles as provided for under the Tariff and Customs Code of 1978, as amended, in order to Implement the Ninety Per Centum Margin of Preference on Certain Products Included in the Nestle ASEAN Industrial Joint Venture (AIJV) Projects, as provided for in Article IE, Paragraph 1 of the Revised Basic Agreement of ALJY Executive Order No. 160, Series of 1994, Reducing the Special Duties on Crude Oil and Oil Products Prescribed in Executive Order No. 115, Series of 1993. Executive Order No. 172, Series of 1994, Increasing the Minimum Tariff Rate From Zero to Three Percent on Articles under Section 104 of the Tariff and Customs Code of 1978 {Presidential Decree No. 1464), as amended. Executive Order No. 173, Series of 1994, Amending Executive Order No. 153, Series of 1994 entitled Modifying the rates of duty on certain imported articles as provided Recommendations for Philippine Anti-Trust Policy and Regulations page 40 of 53 under the tariff and customs code of 1978, as amended, in order to implement the minimum ninety per centum (90%) margin of preference on certain products

included in the Nestle Asean Industrial Joint Venture {AIJV} Projects, as provided for in Article ID, paragraph 1 of the Revised Basic Agreement on AIJV. Executive Order No. 180, Series of 1994, Strengthening the Export Development Council (EDC) amending for this purpose Executive Order (E.O.) No. 110, Further Amending E.O- No. 98. Executive Order No. 151, Series of 1994, Creating a Presidential Commission to Investigate Administrative Complaints Involving Graft and Corruption. Executive Order No. 185, Series of 1994, Opening the Domestic Water Transport Industry to New Operators and Investors. Executive Order No. 189, Series of 1994, Modifying the nomenclature and Rates of Import Duty on Certain Imported Articles under Section 104 of the Tariff and Customs Code of 1978, as amended. Executive Order No. 204, Series of 1994, Modifying the nomenclature and rates of import duty on certain articles under Section 104 of the Tariff and Customs Code of 1978. Executive Order No. 212, Series of 1994, Accelerating the Demonopolization and Privatization Program for Government Ports in the Country. Executive Order No. 213, Series of 1994, Deregulating Domestic Rate. Executive Order No. 219, Series of 1995, Establishing the Domestic and International Civil Aviation Liberalization Policy. Executive Order No. 227, Series of 1995, Reducing the Rates of Import Duty on Cement and Cement Clinker under Section of Presidential Decree 1464, otherwise known as the Tariff and Customs Code of 1978, as amended. Executive Order No. 237, Series of 1995, Modifying the Rates of Import Duty on Certain

Imported Articles as amended, in order to Implement the Decision Taken by the 35th meeting of the Committee on Industry Minerals and Energy (COIM) to Constant Velocity Joint Driveshaft Assembly and Parts Thereof Under the Agreement on ASEAN Industrial Joint Venture (AIJV). Executive Order No. 264, Series of 1995, Modifying the Nomenclature and the Rates of Import Duty on Certain Imported Articles Under Section 104 of the Tariff and Customs Code of 1978 (Presidential Decree No. 1464), as amended. Executive Order No. 287, Series of 1995, Modifying the Rates of Duty on Certain Imported Articles as Provided for Under the Tariff and Customs code of 1978, as amended, in order to implement the 1996 Philippine Schedule of Tariff Reduction Recommendations for Philippine Anti-Trust Policy and Regulations page 41 of 53 Under the New Time Frame of the Accelerated Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade Area (AFTA). Executive Order No. 288. Series of 1995, Modifying the Nomenclature and the Rates of Import Duty on Certain Imported Articles Under Section 104 of the Tariff and Customs Code of 1978 (Presidential Decree No. 1464). as amended. Executive Order No. 298. Series of 1996. Providing for Alternative and/or Intermediate Modes of Privatization Pursuant to Proclamation No. 59 (s. 1986). Executive Order No. 311. Series of 1996. Encouraging Private Sector Participation in the Operations and Facilities of the Metropolitan Waterworks and Sewerage System. Executive Order No. 313. Series of 1996. Modifying the Nomenclature and the Rates of Import Duty on Certain Imported Articles Under Section 104 of the Tariff" and Customs Code of 1978 (Presidential Decree No. 1464). as amended. Executive Order No. 328. Series of 1996. Modifying the Nomenclature and the Rates of Import Duty on Certain Imported Articles Under Section 104 of the Tariff" and

Customs Code of 1978 (Presidential Decree No. 1464). as amended. Executive Order No. 465, Series of 1998. Modifying the Nomenclature and the Rates of Import Duty on Certain Imported Articles Under Section 104 of the Tariff and Customs Code of 1978 (Presidential Decree No. 1464), as amended. Executive Order No. 486, Series of 1998, Modifying the Nomenclature and the Rates of Import Duty on Certain Imported Articles Under Section 104 of the Tariff and Customs Code of 1978 (Presidential Decree No. 1464). as amended. Executive Order No. 63. Series of 1999. Modifying the Nomenclature and the Rates of Import Duty on Certain Imported Articles Under Section 104 of the Tariff and Customs Code of 1978 (Presidential Decree No. 14 m (/U4), as amended. Executive Order No. 208. Series of 2000, Modifying the Nomenclature and the Rates of Imported Articles Under Section 104 of the Tariff and Customs Code of 1978 (Presidential Decree No. 1464), as amended. Recommendations for Philippine AntiTrust Policy and Regulations page 42 of 53 APPENDIX 2: Draft Bills in Congress House Bill No. 116 - "An Act Creating the Philippine Competition Commission, Regulating and Penalizing Trade Practices that Lessen Competition and Other Anti-Competitive Practices and Conduct, Unlawful Mergers, Acquisitions and Combinations in Restraint of Trade, Unfair Competition, and Appropriating Funds Therefor, and for other purposes" authored by Rep. Joey Sarte Salceda House Bill No. 117 - "An Act Providing for the Regulation of Investment Companies" authored by Rep. Joey Sarte Salceda House Bill No. 400 - "An Act Instituting a System of Allowing Parallel Importation of Medicines into the Country" - authored by Rep. Roseller L. Barinaga

House Bill No. 567 - "An Act Establishing a National Cellular and Wireless Telephone Program" - authored by Rep. Roilo Golez House Bill No. 1874 - "An Act Prescribing a Fair Competition Law, its Enforcement, the Establishment of a Fair Trade Commission, Delineating its Powers and Functions, and for other purposes" - authored by Rep. Jose C. De Venecia, Jr. House Bill No. 2251 - "An Act to Promote the Efficient and Effective Delivery of Converging Communications Services" - authored by Rep. Jacinto V. Paras House Bill No. 2958 - "An Act Prohibiting Monopolies, Attempt to Monopolize an Industry or Line of Commerce, Manipulation of Prices of Commodities, Asset Acquisition and Interlocking Memberships in the Board of Directors of Competing Corporate Bodies and Price Discrimination Among Customers, Providing Penalties Therefor, and for other Purposes" authored by Rep. Edgar L. Valdez House Bill No. 3139 - "An Act Prohibiting Monopolies, Attempt to Monopolize an Industry or Line of Commerce, Manipulation of Prices of Commodities, Asset Acquisition and Interlocking Memberships in the Board of Directors of Competing Corporate Bodies and Price Discrimination Among Customers, Providing Penalties Therefor, and for other purposes" - authored by Rep. Juan Ponce Enrile, Jr. Senate Bill No. 150 - "An Act Creating the Fair Trade Commission, Prescribing its Powers and Functions in Regulating Trade Competition and Monopolies, and For Other Purposes" authored by Sen. Sergio Osmea III Senate Bill No. 1600 - the Anti-Trust Act of 2001 or "An Act Prohibiting Monopolies, Attempt to

Monopolize an Industry or Line of Commerce, Manipulation of Prices of Commodities, Asset Acquisition and Interlocking Memberships in the Board of Directors of Competing Corporate Bodies and Price Discrimination Among Customers, Providing Penalties Therefor, and for other purposes" - authored by Sen. Panfilo M. Lacson Senate Bill No. 1792 - "An Act Prohibiting Monopolies, Attempt to Monopolize an Industry or Line of Commerce, Manipulations of Prices of Commodities, Asset Acquisition and Recommendations for Philippine Anti-Trust Policy and Regulations page 43 of 53 Interlocking Memberships in the Board of Directors of Competing Corporate Bodies and Price Discrimination among Customers, Providing Penalties Therefor and for Other Purposes" - authored by Sen. Juan Ponce Enrile. Recommendations for Philippine Anti-Trust Policy and Regulations page 44 of 53 APPENDIX 3: Draft Bill for Discussion Purposes Republic of the Philippines SENATE /HOUSE OF REPRESENTATIVES Manila / Quezon City 13th Congress Introduced bv ______________ AN ACT CREATING THE PHILIPPINE TRADE COMMISSION. REGULATING AND PENALIZING THE ABUSE OF DOMINANT POSITION. RESTRICTIVE AGREEMENTS, UNLAWFUL MERGERS, ACQUISITIONS AND COMBINATIONS IN RESTRAINT OF TRADE, UNFAIR COMPETITION AND OTHER ANTICOMPETITIVE PRACTICES AND CONDUCT, AND APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives in Congress assembled: ARTICLE I-TITLE AND POLICY Section 1. Title - This Act shall be known as the "Philippine Fair Trade Act Section 2. Declaration of Policy - It is the policy of the State to maintain and enhance free and full competition in trade, industry and all commercial economic activity penalize all forms of unfair trade, anti-competitive conduct and combinations in restraint of trade, in order to ultimately enhance consumer welfare. ARTICLE 2 - SCOPE OF THE LAW AND DEFINITION OF TERMS Section 1. Applicability - This Act shall be enforceable in the whole territory of the Republic of the Philippines and applies to all areas of trade, industry and commercial economic activity. The Act shall be applicable to all matters specified in Articles 3, 4, 5 and 6, having substantial effects in the Republic of the Philippines, including those that result from acts done outside the Republic of the Philippines. Section 2. Limitations - This Act does not derogate from the direct enjoyment of the privileges and protections conferred by Republic Act No. 8293 (1997). otherwise known as the Intellectual Property Code, and other laws protecting intellectual property, including inventions, industrial models, trademarks and copyrights. It does, however, apply to the use of such property in such a manner as to cause the anti-competitive effects prohibited herein. This Law shall apply neither to the combinations or activities of workers or employees, nor to agreements or arrangements between two or more employers, when such combinations, activities, agreements or arrangements are designed solely to facilitate collective bargaining in respect of conditions of employment.

Section 3. Definition of terms - Whenever used in this Act. the following terms shall be taken to mean as follows: Recommendations for Philippine Anti-Trust Policy and Regulations page 45 of 53 (a) "Competition" - the process by which economic agents, acting independently in a market, limit each other's ability to control the conditions prevailing in that market. (b) "Commission" - the Philippine Trade Commission created in Article 7 of this Act. (c) "Firm" - any natural or legal person, governmental body, partnership or association in any form, engaged directly or indirectly in economic activity. Two firms, one of which is controlled by the other, shall be treated as one firm. Two or more firms that are controlled by a single firm shall be treated as one firm. The Commission shall, from time to time, adopt a regular setting of what constitutes control. (d) "Goods" - all property, tangible and intangible, and services. (e) "Market" - a collection of goods that are capable of being substituted for each other and that buyers are or would be willing to substitute, and a specific territory, which may extend beyond the borders of the Republic of the Philippines, in which are located sellers among whom buyers are or would be willing to substitute from whom they would buy. ARTICLE 3 - ABUSE OF DOMINANT POSITION Section 1. Dominant Position A firm shall be deemed to have a dominant position if, acting on its own, it can profitably and materially restrain or reduce competition in a market for a significant period of time. Section 2. Safe Harbor - A firm shall not be deemed to have a dominant position unless

its share of the relevant market exceeds the percentage set by the Commission in its guidelines. A firm having a market share exceeding a percentage set by the Commission, may or may not be found to be dominant, depending on the economic situation in that market. Section 3. Balancing Efficiencies - An agreement prohibited under Section 2 of this Article may nevertheless be permissible and allowed by the Commission if said agreement has brought about, or is likely to bring about, gains in real, as opposed to merely pecuniary, efficiencies that (a) are greater than or more than offset the effects of any limitation on competition that result or are likely to result from the agreement; or (b) consumer well being is expected to be enhanced as a result of the agreement Section 4. Burden of proof - The burden of proof to show that the agreement is not prohibited lies with the parties seeking the exemption pursuant to Section 3. Such parties are required to. among others, demonstrate that if the agreement were not implemented, it is not likely that the relevant real efficiency gains would be realized by means that would limit competition to a lesser degree than the agreement. Section 4. Burden of Proof - The burden of proof to show that the agreement is not prohibited lies with the parties seeking the exemption pursuant to Section 3. Such parties are required to, among others, demonstrate that if the agreement were not implemented, it is not likely that the relevant real efficiency gains would be realized by means that would limit competition to a lesser degree than the agreement. ARTICLE 5 - MERGERS AND ACQUISITIONS Recommendations for Philippine AntiTrust Policy and Regulations page 46 of 53

Section 1. Review of Concentrations - A concentration shall be deemed to arise when: (a) two or more previously independent firms merge, amalgamale or combine the whole or a part of their business; or (b) one or more natural or legal persons already controlling at least one firm, acquire, whether by purchase of securities or assets, by contract or by other means, direct or indirect control of the whole or parts of one or more oilier firms. Section 2. Control - For the purpose of this Article, control is defined as the ability to materially influence a firm, in particular through: (a) ownership or the right to use all or part of the assets of an undertaking: or (b) rights or contracts which confer decisive influence on the composition, voting or decisions of the organs of a firm. Section 3. Compulsory Notification - Parties to an agreemen! Ihat will produce a concentration larger than the minimum size as may be provided in regulations issued pursuant to Section 7 of this Article, are prohibited from consummating such concentration until thirty (30) days after providing notification to the Commission, in the form and containing the information specified in regulations issued pursuant to section 7, An agreement consummated in violation of this requirement shall be considered void and subject the parties to the corresponding penalties therefor. Section 4. Further Information - The Commission may, in writing, request the parties to the agreement, for further information, before the expiration of (he thirty (30) day period referred to in section 3 of this Article. The issuance of such a request has the effect of extending the period within which the concentration may not be consummated for an additional thirty (30) days, beginning on the day after

substantially all of the requested information is supplied to the Commission. Section 5. Voluntary Notification - Parties to an agreement who are not subject to the notification requirement in Section 3 of this Article may voluntarily notify and, if they do so. be subject ID the same procedures, restrictions and rights as are applied to cases of compulsory notification, Section 6. Effect of Notification - If, before consummation of a concentration, the Commission determines that such concentration is prohibited under Section 8, and does not qualify for exemption under Section 9, of this Article, the Commission may: (a) prohibit consummation of the concentration; (b) prohibit consummation of the concentration unless and until it is modified by changes specified by the Commission; or (c) prohibit consummation of the concentration unless and until the pertinent party or parties enter into legally enforceable agreements specified by the Commission. Section 7. Section 7. Regulations of the Commission - The Commission shall from time to time adopt and publish regulations, stipulating: (a) the minimum size or size of concentrations subject to the notification requirement of Section 3 of this Article; (b) the information that must be supplied for notified concentrations; (c) exceptions or exemptions from the notification requirements of Section 3 for specified types of concentrations; and (d) other rules relating to the notification procedures in Sections 3, 4 and 5 of this Article. Recommendations for Philippine Anti-Trust Policy and Regulations page 47 of 53 Section 8. Prohibited Concentrations - Concentrations that will significantly limit

competition as may be determined by the Commission are prohibited. Section 9. Permissible Concentrations. Concentrations prohibited under Section 8 of this Article shall, nonetheless, be free from prohibition by the Commission where the parties establish that either: (a) the concentration has brought about or is likely to bring about gains in real, as opposed to merely pecuniary, efficiencies that are greater than or more than offset the effects of any limitation on competition that result or are likely to result from the concentration; or (b) a party to the concentration is faced with actual or imminent financial failure, and the concentration represents the least anti-competitive arrangement among the known alternative uses for the failing firm's assets. Section 10 Burden of Proof - The burden of proof under Section 9 lies with the parties seeking the exemption. A party seeking to rely on the exemption specified in Section 9 (a) must demonstrate that if the concentration were not consummated it is not likely that the relevant real efficiency gains would be realized by means that would limit competition to a lesser degree than the concentration. A party seeking to rely on the exceptions specified in Section 9 (b) must: (a) demonstrate that reasonable steps have been taken within the recent past to identify alternative purchasers for the failing firm's assets; and (b) fully describe the results of that search. Section 11. Prescription - The Commission may determine, within three (3) years after consummation, that either: (a) a non--notified concentration; or (b) a notified concentration in which the provisions of Sections 3 to 5 of this

Article are not fully complied with. has led or will probably lead to a significant limitation of competition and does not quality for exemption set out in Section 9 of this Article. If it so determines, the Commission may: (a) undo the concentration by dissolving it into its constitutes elements; (b) require other modifications of the concentration, including sale of a portion of its operations or assets; or (c) require the surviving firm or firms to enter into legally enforceable agreements specified by the Commission and designed to reduce or eliminate the competition limiting effects of the concentration. ARTICLE 6 - UNFAIR COMPETITION Section 1. Unfair Competition - Unfair competition is prohibited, including: (a) the distribution of false or misleading information which is capable of harming the business interests of another firm; (b) the distribution of false or misleading information to consumers, including the distribution of information lacking a reasonable basis, related to the price, character, method or place of production, properties, suitability for use. or quality of goods; (c) false or misleading comparison of goods in the process of advertising; (d) fraudulent use of another's trademark, firm name, or product labeling or packaging; or Recommendations for Philippine Anti-Trust Policy and Regulations page 48 of 53 (e) unauthorized receipt, use, or dissemination of confidential scientific, technical, production, business or trade information. ARTICLE 7 - THE COMMISSION Section 1. Philippine Trade Commission - There is hereby created (The existing Tariff

Commission of the Philippines is hereby reconstituted into) an independent collegial body to be known as the Philippine Trade Commission. The Commission shall be composed of a Chairman and four (4) Associate Commissioners, all of whom shall be appointed by the President for a term of seven (7) years without reappointment. The Chairman and two (2) of the Associate Commissioners first appointed shall serve for a period of seven (7) years, while the other two (2) Associate Commissioners shall serve for five (5) years as shall be indicated in their respective appointments. Appointment to any vacancy shall only be for the unexpired term of the predecessor. In no case shall a member of the Commission be designated or appointed in a temporary' or acting capacity. The Chairman of the Commission can only be removed for patent disability to discharge his]her functions. Section 2. Qualifications - The Chairman and the Associate Commissioners shall be citizens of the Philippines, at least forty (40) years of age, of recognized probity, integrity, and competence in the field of law, economics, finance banking, commerce, industry and/or consumer welfare, and must not have been a candidate for an elective national or local office in the immediately preceding election, whether regular or special. Section 3. Rank and Salary - The members of the Commission shall have the same rank, privileges, and salaries as the Chairman and members of a Constitutional Commission. Their salaries shall be set, and from time to time be adjusted by the President. In no case shall their salaries be decreased during their term of office. Section 4. Prohibitions and Disqualifications - The members of the Commission shall not, during their tenure, hold any other office or employment. They shall not during their tenure, directly or indirectly, practice any profession, participate in any

business or financially interested in any contract or any franchise, or special privilege granted by the government of any subdivision, agency or instrumentality thereof, including government-owned and controlled corporations or their subsidiaries: Provided, however, that they may, with the prior permission of the President teach part time in any institution of learning. They shall, at all times, strictly avoid conflict of interest situations in the conduct of their office. They shall not be qualified to run for any office in any public election, regular or special, immediately preceding their cessation from office. They shall not be allowed to appear or practice before the Commission for a period of one (1) year following their cessation from office. Section 5. Meetings, Notice, and Quorum - The Commission shall meet as often as may be necessary on such days as the Chairman, or in his]her absence, as a majority of the Commissioners may fix. The notice of meeting shall be given to all members at least one (1) day before the scheduled date of the meeting. The presence of at least three (3) Commissioners shall constitute a quorum. In the absence of the Chairman, one of the Associate Commissioner chosen by those present shall act as the presiding officer of the meeting. Recommendations for Philippine Anti-Trust Policy and Regulations page 49 of 53 Section 6. Secretariat - The Commission shall have a Secretariat with a staff complement as may be determined by the Chairman in consultation with the Department of Budget and Management. The Secretariat shall be headed by an Executive Director who shall be appointed by the President, He/she shall act as the secretary of the Commission and shall be responsible for the effective implementation of the policies, rules and standards

set by the Commission and oversee and coordinate the day-to-day activities of the different operating units of the Commission. ARTICLE 8 - POWERS AND FUNCTIONS OF THE COMMISSION Section 1. Powers and Functions - To carry out the objectives of this Act, the Commission shall have and exercise the following powers and functions: (a) To enforce and effectively administer the provisions of this Act and other fair trade laws, subject to the powers vested in the courts and other administrative agencies under this Act; (b) undertake and prepare industry studies to determine industry structures, and the state of competition and competitiveness of Philippine industries, and collate, compile, distribute and disseminate resource materials on competition policy, with the end in view of creating a national database on competition; (c) conduct workshops and seminars, information campaigns for the public, and train or develop a pool of experts on competition; (d) extend technical assistance to the Philippine delegations to international bodies and meetings in regard to trade and competition law and policy; (e) draft and recommend proposed administrative and legislative measures for respective consideration and adoption/enactment by the Executive or Legislative Branch of government; (f) make submissions to the government authorities engaged in designing or administering legislation or regulations which could affect competition in any market in the Philippines, intervene in hearings and proceedings held with regard to the adoption or administration of such laws or regulations, and publish the submissions and interventions above referred to. provided that confidential information is not divulged;

(g) administratively adjudicate violations of this Act and rules and regulations issued pursuant thereto, by conducting a formal investigation, independent of the corresponding criminal and civil action for said violation(s). The imposition of administrative penalties in the formal investigation is without prejudice to the imposition of penalties in the criminal action and/or judgment in the civil action and vice versa. As soon as a formal charge is filed with the Commission and even prior to the commencement of the formal investigation, the Commission may motu propio or upon verified application of any person, issue preliminary orders prohibiting firms from carrying on the anticompetitive or unfair practices referred to in this Act and, if necessary, requiring such firms to take other specified actions to eliminate the harmful effects of such practices and to ensure against recurrence of such practices. Before issuing any orders, the Commission shall be satisfied that the proposed measures are urgently required to avoid serious, imminent and irreparable harm to the economic interests of the Philippines, as expressed in this Act. Where the Recommendations for Philippine Anti-Trust Policy and Regulations page 50 of 53 effectiveness of the order would not thereby be prejudiced, the Commission may permit the firms that would be subject to the order to present their views regarding the proposed order. The Commission shall provide by rules and regulation* the older procedures and restrictions for the issuance of such preliminary orders. All orders may. under this Section, lose effect twenty one (21) days after they are issued, unless renewed by express decision of the Commission. Upon its decision becoming final and executory, the Commission on its

own initiative or upon motion of the winning part)' shall issue a writ of execution. The Commission shall deputize the Philippine National Police. National Bureau of Investigation or Armed Forces ot' the Philippines in the enforcement of any of its decisions and orders. Orders and decisions issued under this Section may be appealed (o the pertinent appeal court, but do not lose their effect pending the outcome of the appeal; (h) conduct its own administrative investigations for the purpose of: (1) obtaining information relative to any activity that constitutes any past or present violation of this Act and Other fair trade laws; and (2) gathering and compiling trade information relative to: (i) the nature, organization and resources of any person, firm. entity or association doing business in and/or with the Philippines or a Philippine firm: (ii) determining and evaluating the practices, acts methods, schemes, arrangements and other trade conditions prevailing in an industry. (i) the officials authorized to conduct the preliminary or administrative investigations, including formal investigations for purposes of administrative adjudication referred to in the Section 1 (g) of this Article, shall have the power to administer oaths, issue subpoena duces tecum to compel the attendance of witnesses and the production of necessary' papers and documents', and to punish direct and indirect contempt as granted to superior courts under the Rules of Court: (j) initiate or institute the appropriate civil action or proceeding before the proper court or administrative agency in the implementation of (he provisions of this Act and other fair trade laws or restrain any threatened

violations thereof: (k) institute the appropriate information and prosecute criminal cases for any and all violations of this Act and other fair trade laws after conducting a preliminary investigation motu proprio or upon complaint of any person, when there is sufficient ground to engender a well founded belief that the violation(s) complained of is/are being or has/have been committed, and in addition, and subject to the rules on prosecution of civil action under the Rules of Court, institute the appropriate action for the recovery of civil liability; (I) To recommend the amendment of existing franchises when, based on its own evaluation, the same has adversely affected the growth of the relevant market or industry; (m) To periodically conduct an inspection of any pertinent: (1) factory, shop, laboratory, establishment, store, warehouse, any means of transportation, and the like; Recommendations for Philippine Anti-Trust Policy and Regulations page 51 of 53 (2) papers, documents, and records found in such liictorv. shop, laboratory, establishment, store, warehouse, means of transportation, and the like; (3) equipment, finished or unfinished products, raw materials, containers, labeling and other pertinent properties found in such factory, shop, laboratory, establishment, store, warehouse, means of transportation, and the like; (4) activity being undertaken in such factory, shop, laboratory, establishment, store, warehouse, means of transportation and the

like, which may be necessary to determine violations or which may aid in the enforcement of this Act, other fair trade laws, or rules and regulations issued pursuant thereto. The officials authorized to conduct said inspection may obtain a reasonable quantity of samples of the properties (except equipment) mentioned in Section 1 (m) (3) of this Article, to take pictures or video tapes of the places things mentioned in Section 1 (m) (1) and 3 of this Article, and secure copies of the papers mentioned in Section 1 (m) (2) of this Article. All acts authorized under this subsection shall be conducted at reasonable promptness, in a professional manner and without undue disturbance to any legitimate work or activity being undertaken inside the premises of such places. Receipts shall be issued for samples which may thereafter be so obtained; (n) require any person, firm, entity or association to submit to it periodically or whenever necessary, such report, data, information, paper or document in such form as may Ube prescribed by the Commission; (o) request the different government agencies for assistance in obtaining information necessary for the proper discharge of its responsibilities under this Act, and examine, if necessary, the pertinent records and documents in the possession of such government agency; (p) promulgate such rules and regulations as may be necessary to implement the provisions and intent of this Act. Such rules shall be take effect fifteen (15) days following their publication in at least

two (2) newspaper of general circulation or in the Official Gazette; and (q) To perform such other functions as it may deem appropriate for the proper enforcement of this Act. Section 2. Advance Rulings - Parties may apply to the competition office for advance rulings, binding on that office, regarding eligibility for exemptions. If it chooses to grant an advance ruling, the competition office may include in it specified conditions and requirements. The advance ruling shall by its terms exists for a specified period of time. Advance rulings may be renewed upon application by the parties. An advance ruling may be revoked or modified if: (a) a significant change in circumstances has occurred since the ruling; (b) the applicant infringed a condition or a requirement specified in the ruling; Recommendations for Philippine Anti-Trust Policy and Regulations page 52 of 53 (c) the decision to grant the ruling was materially influenced by inaccurate, fraudulent or misleading data; or (d) the applicant abused the exemption granted to it. The competition office shall arrange for publication of its advance rulings, omitting any confidential information. It may arrange similar publication of all other decisions taken under this Act, again omitting any confidential information. Section 3. Rules on Confidentiality and Conflict of Interest - Officials of the Commission, as well as their agents and consultants, shall maintain the confidentiality of all business, commercial or official information of which they become aware during the course of their official activities, except that which is otherwise public. Disclosure of such confidential information may occur in the course of

administrative or judicial proceedings arising under this Act. or otherwise as permitted by a court of competent jurisdiction. All members of the Commission shall inform the Office of the Chairman of the Commission of any position held or activity carried out in an economic field by the member, including all agents thereof The Chairman shall take all necessary steps to ensure there is no conflict of interest arising from such positions or activities, including requiring that such positions be resigned or activities cease. ARTICLE 9 - PENALTIES Section 1. Administrative Penalties - After formal investigation, the Commission may impose one or more of the following administrative penalties: (a) censure of the erring firm(s); and/or (b) issuance of a Cease and Desist order which must specify the acts that the respondent shall cease and desist from and shall require him lo submit a report of compliance therewith a reasonable time which shall be fixed in the order, and/or (c) condemnation or Seizure of Products or Property, in such manner as may be deemed appropriate by the Commission and in coordination with the proper authorities and remain in the custody of the Commission subject to the finality of the decision: Provided, That perishable goods shall be disposed of and the proceeds of such disposition shall be subject lo the final order or decision of the Commission in the case; and/or (d) other analogous penalties as may be deemed proper by the Commission. Section 2. Imposition of Administrative Fines - Administrative tines may be imposed in such an amount deemed reasonable by the Commission, which, in the case of an individual, shall not be less than Three Hundred Thousand Pesos (P300.000.00) nor more than One Million Pesos (PI,000.000.00). and in the case of a corporation

or other judicial entity, not less than Three Million Pesos (P3,000.000.00) nor more than One Hundred Million Pesos (P 100,000,000.00). and in both instances, an additional fine of Ten Thousand Pesos (P10.000.00) for each day of continuing violation: Provided, That in cane of violations by corporations, associations, partnership or other juridical entities, individual fines may still be imposed on the officers directly or indirectly responsible for the implementation of the prohibited act. The tine imposed herein shall be regardless of the limit on the criminal fine in this Act and other fair trade laws violated. Section 3. Criminal Penalties - Any person who shall commit a prohibited act defined under Articles 3. 4. 5. and 6 or shall violate any provision of this Act shall be Recommendations for Philippine Anti-Trust Policy and Regulations page 53 of 53 guilty of a felony and, upon conviction thereof shall suffer the penalty of imprisonment of not less than five (5) years but not more than twenty (20) years and a line of not less than Three Hundred Thousand Pesos (P300.000.00} in the case of an individual, and not less than Three Million Pesos (P3,000.000.00) in the case of a corporation or other juridical entity: Provided, That in case of violation by corporations, associations, partnerships or other juridical entities, the penalty of imprisonment shall be imposed on the officers directly or indirectly responsible for the implementation of the prohibited act. In addition to the foregoing penalties, the court may order the closure or dissolution of the establishment or firm where circumstances warrant and any properly owned under any contract or by any combination, or pursuant to any conspiracy, and subject thereof as mentioned in the preceding sections, shall be forfeited in favor of the government Section 4. Award Of Damages - Any person who shall be injured in his'its business or

property by any other person or corporation shall recover the amount of damages sustained by reasoned of the act declared to be unlawful by this Act. including the costs of suit and reasonable attorney's fees: Provided. That this Section shall be without prejudice to the tiling of the appropriate criminal action against the oil en ding party Section 5. Alien Violation If the person committing the violation of this Act he an alien or a foreign firm, he/its foreign officers/representatives shall, in addition to the above penalties, be deported alter paying his/its line and/or serving his sentence without need of any further proceedings. Section 6, Public Officer as Offender - If the offender is a public officer, he shall, in addition, suffer the penalty if perpetual disqualification from holding a public office. ARTICLE 10 - FINAL PROVISIONS Section 1. Appropriations - The amount necessary to carry out the provisions of this Act shall be included in the Genera! Appropriations Act of the year following its enactment into law and thereafter. Section 2. Repealing Clause - All laws, decrees, orders, rules and regulations and all other issuance or parts thereof inconsistent with the provisions of this Act are hereby repealed or amended accordingly. Section 3. Separability Clause - If any part or provision of this Act is held unconstitutional or invalid, other parts or provisions hereof which are not affected thereby shall remain in full force and effect. Section 4. Effectivity Clause - This Act shall take effect immediately upon publication in the Official Gazette or at least two (2) newspapers of general circulation

approved.

1 THE ASEAN COMPETITION LAW PROJECT: THE PHILIPPINES REPORT By Atty. Tristan A. Catindig March 31, 2001 Introduction The Philippines has no general competition law, i.e., a law whose objective or purpose is to control or eliminate restrictive agreements or arrangements among enterprises, or mergers and acquisitions or abuse of dominant positions of market power, which limit access to markets or otherwise unduly restrain competition, adversely affecting domestic or international trade or economic development. 1 In the past three years, however, several bills have been filed in the Senate and the House of Representatives of the Congress of the Philippines which purport to fill this gap in Philippine modern legislation. While the Philippines has no general competition law, its statute books are replete with laws some of the provisions of which deal with aspects of competition law such as monopolies and combinations in restraint of trade, restrictive business practices, price control measures and consumer protection. Statutory provisions dealing with competition can be found in more than a dozen laws with the earliest dating back to as early as July

1887 and the latest being signed into law in July 2000. Background of Competition Law Cultural and Historical Aspects of Competition Law Under Spain Monopolies existed in the Philippines when it was under Spain. They were officially established by Spain to raise funds for its King. The latter in turn funded the expenses of the colonial government. This system, called the real hacienda or the Kings estate continued until the Philippines ceased to be a possession of the King of Spain and was made a part of Espaa en Ultramar or Overseas Spain. The government in Manila that once was dependent on the real hacienda for operating funds now acquired the status of a conventional colonial government that assumed the responsibility for raising its revenues. 2

1 Draft possible elements for Article 1 (objectives or purposes of the law) of the revised version of the United Nations Conference on Trade and Development Model Law on Competition. 2 An Economic History of the Philippines by O. D. Corpuz, University of the Philippines Press, 1997, at p. 140) 2 Plowmaking was made a monopoly in the late 16 th century and was farmed out in

auctions conducted by the government. 3 Monopolies were later on established in certain activities, such as cockfighting, 4 and in the production and sale of certain goods such as native liquor from coconut and nipa palm, betel nut 5 and tobacco. The monopoly on native liquor was set up in 1712 while that on tobacco in 1782. 6 The latter was abolished , on account of frauds and uneconomic operations, in 1882. 7

The first legal provisions to deal with monopolies and combinations in restraint of trade could be found in Articles 543, 544 and 545 of the Spanish Penal Code as made applicable to the Philippines (the Old Penal Code): The royal decree of September 4, 1884 directed that the Spanish Penal Code of 1870, as modified in accordance with the recommendations of the Code Commission for Overseas Provinces, be published and applied in the Philippines. The royal decree of December 17, 1886 ordered the enforcement of the previous royal decree. The Penal Code for the Philippines was published in the Manila Official Gazette on March 13 and 14, 1887 and it took effect four months thereafter, or on July 14, 1887. It was in force up to December 31, 1931. It was modified and supplemented by various special

penal laws. 8

Under the Americans On December 1, 1925, the Philippine Legislature enacted Act No. 3247 entitled "An Act to Prohibit Monopolies and Combinations in Restraint of Trade." This law, which supplemented the provisions of the Old Penal Code then still enforced in the Philippines, was based on the Sherman Act of the United States which took effect in 1890. Act No. 3247 was repealed upon the approval of the Revised Penal Code (Act No. 3815, as amended) on December 8, 1930. It went into effect on January 1, 1932. Article 186 of the Revised Penal Code. which is entitled monopolies and combinations in restraint of trade, was taken from Articles 543, 544 and 545 of the Old Penal Code and Act No. 3247. As amended by Republic Act No. 1956, approved on June 22, 1957, it now reads as follows: ARTICLE 186. Monopolies and combinations in restraint of trade. - The penalty of prision correccional in its minimum period or a fine ranging from 200 to 6,000 pesos, or both, shall be imposed upon: 1. Any person who shall enter into any contract or agreement or shall take part in any conspiracy or combination in the form of a trust or

3 Ibid., at p. 28. 4 Ibid., at p. 119.

5 Ibid., at p. 66. 6 Ibid., at p. 119. 7 Ibid., at p. 191. 8 The Revised Penal Code by Ramon C. Aquino, Central Book Supply, Inc., 1961, at pp. 1-2. 3 otherwise, in restraint of trade or commerce to prevent by artificial means free competition in the market. 2. Any person who shall monopolize any merchandise or object of trade or commerce, or shall combine with any other person or persons to monopolize said merchandise or object in order to alter the price thereof by spreading false rumors or making use of any other article to restrain free competition in the market. 3. Any person who, being a manufacturer, producer, or processor of any merchandise or object of commerce or an importer of any merchandise or object of commerce from any foreign country, either as principal or agent, wholesaler or retailer, shall combine, conspire or agree in any manner with any person likewise engaged in the manufacture, production, processing, assembling or importation of such merchandise or object to commerce or with any other persons not so similarly engaged for the purpose of making transactions prejudicial to lawful commerce, or of increasing the market price in any part of the Philippines, or any such merchandise or object of commerce

manufactured, produced, processed, assembled in or imported into the Philippines, or of any article in the manufacture of which such manufactured, produced, processed, or imported merchandise or object of commerce is used. If the offense mentioned in this article affects any food substance, motor fuel or lubricants, or other articles of prime necessity; the penalty shall be that of prision mayor in its maximum and medium periods, it being sufficient for the imposition thereof that the initial steps have been taken toward carrying out the purposes of the combination. Any property possessed under any contract or by any combination mentioned in the preceding paragraphs, and being the subject thereof, shall be forfeited to the Government of the Philippines. Whenever any of the offenses described above is committed by a corporation or association, the president and each one of the directors or managers of said corporation or association or its agents or representative in the Philippines in case of a foreign corporation or association, who shall have knowingly permitted or failed to prevent the commission of such offenses, shall be held liable as principals thereof. Article 186 continues to be the law directly applicable to monopolies and combinations in restraint of trade. Since there is a dearth of Philippine case law on Article 186, resort may be had to decisions of United States courts interpreting provisions of the Sherman Anti-Trust Law. 9

Has Article 186 been an effective deterrent to monopolies and combinations in

restraint of trade? In a letter to the Executive Director of the Office of United Nations and International Organizations, answering a questionnaire of the UN Secretary General on, among other matters, how effective in practice has been Articles 185 and 186 of the Revised Penal Code penalizing machinations in public auctions and monopolies and

9 Department of Justice Opinion No. 19, series of 1962, February 26, 1962. 4 combinations in restraint of trade, respectively, the then Minister of Justice responded with candor that as far as he is aware, no business enterprise has yet been indicted under the anti-trust provisions of the Revised Penal Code, nor has any official been successfully impeached by the legislature. 10

Early Post-War Period: Parity Rights A different kind of monopoly was established after the Second World War. This came about with the coerced grant to the Americans of parity rights effected in the form of an ordinance appended to the 1935 Philippine Constitution. The amendment, known as the parity amendment, provided that

Notwithstanding the provisions of section one, Article Thirteen [dealing with the disposition, exploitation, development and utilization of natural resources], and section eight, Article Fourteen [dealing with the operation of public utilities], of the

foregoing Constitution, during the effectivity of the Executive Agreement entered into by the President of the Philippines with the President of the United States on the fourth of July, nineteen hundred and forty-six, pursuant to the provisions of Commonwealth Act Numbered Seven hundred and thirty-three, but in no case to extend beyond the third of July, nineteen hundred and seventy-four, the disposition, exploitation, development, and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the Philippines, and the operation of public utilities, if open to any person, be open to citizens of the United States and to all forms of business enterprises owned or controlled, directly or indirectly, by citizens of the United States in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines. (Emphases and bracketed comments supplied) By virtue of the Laurel-Langley Agreement of 1956 between the Philippines and the United States, American parity rights in the Philippines were extended not only to the exploitation of natural resources but to all economic activities. Thus, American businessmen, vis-a-vis businessmen of other nationalities, could venture into the same businesses that Philippine nationals could go into, including the ownership of land. This monopoly continued until the termination of parity rights on July 3, 1974, except for the ownership of land acquired from private individuals which was extended by decree to May 17, 1975 by then President Ferdinand E. Marcos. 11

Mid-Century Nationalization Laws: In General Apart from the severe economic dislocation suffered by the country after the Second World War and the other problems that came with it, the Philippine economy also suffered from alien control of the domestic trade. To remedy this problem, various laws designed to limit the access of non-Philippine nationals to certain sectors of the economy were passed. Among these laws were

10 Department of Justice Opinion No. 160, series of 1983, October 17, 1983. 11 History of the Filipino People by Teodoro A. Agoncillo, Garotech Publishing, 8 th ed., 1990, at p.515 5 (1) Republic Act No. 37, approved on October 1, 1946 and effective on January 1, 1947, which granted preference to Filipino citizens in the lease of public market stalls; (2) Republic Act No. 1180, approved on June 19, 1954, which nationalized the retail trade (and in respect of which a more extensive discussion follows); (3) Republic Act No. 1292, approved on June 15, 1955, which created a Filipino retailers fund for the purpose of providing credit facilities for the promotion and development of Filipino retail trade and required importers of prime commodities to sell to Filipino retailers at least 30% of their imports at the same mark-up as their sales through their then trade channels; (4) Republic Act No. 1345, approved on June 17, 1955, which created the

National Marketing Corporation, a government corporation that will engage in the procurement, purchase and distribution of merchantable goods to Filipino retailers and businessmen; and (5) Republic Act No. 3018, approved on August 2, 1960 and effective on January 1, 1961, which limited the right to engage in the rice and corn industry to citizens of the Philippines. This law was repealed in 2000 by Republic Act No. 8762. Mid-Century Nationalization Laws: The Nationalization of the Retail Trade Under Section 1 of Republic Act No. 1180 (RA 1180), otherwise known as the Retail Trade Nationalization Law, no person who is not a citizen of the Philippines, and no association, partnership, or corporation the capital of which is not wholly owned by citizens of the Philippines, shall engage directly or indirectly in the retail business. As used in RA 1180, the term "retail business" means any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for consumption, but shall not include: (a) a manufacturer, processor, laborer, or worker selling to the general public the products manufactured, processed or produced by him if his capital does not exceed P5,000, or (b) a farmer or agriculturist selling the products of his farm. (Sec. 4) In confirming the constitutionality of the law, the Philippine Supreme Court, in the case of King, et al. vs. Hernaez, et al., G.R. No. L-14859, March 31, 1962, held that the purpose of RA 1180 x x x is to completely nationalize the retail trade in the Philippines. In other words, its primordial purpose is to confine the privilege to engage in retail trade to

Filipino citizens by prohibiting any person who is not a Filipino citizen or any entity whose capital is not wholly owned by citizens of the Philippines from engaging, 6 directly or indirectly, in the retail business. The nationalization of retail trade is, therefore, complete in the sense that it must be wholly owned by a Filipino citizen or Filipino controlled entity in order that it may be licensed to operate. The law seeks a complete ban to aliens who may not engage in it directly or indirectly. And the reasons behind such ban are the pernicious and intolerable practices of alien retailers who in the past have either individually or in organized groups contrived in many dubious ways to control the trade and dominate the distribution of goods vital to the life of our people thereby resulting not only in the increasing dominance of alien control in retail trade but at times in the strangle hold on our economic life. RA 1180 may not have elicited as much concern among most foreign businessmen if it were interpreted as applicable only to consumer goods, i.e., goods for personal or household consumption. It was, however, read broadly as being applicable also to industrial or commercial goods. Efforts at having the law amended by Congress proved difficult. However, when Martial Rule was declared by then President Ferdinand E. Marcos in 1972, the opponents of RA 1180 saw an opportunity to restrict the scope of the law. Using his legislative power under martial law, President Marcos issued Presidential Decree No. 714 (PD 714) on May 28, 1975 amending RA 1180. clauses of PD 714 provided the justification for the amendment of RA 1180: WHEREAS, the statutory definition in Republic Act No. 1180, otherwise known as the Retail Trade Nationalization Law, of the term "retail business" is vague and ambiguous, and this ambiguity has given rise to conflicting theories as to its precise scope; The Whereas

WHEREAS, it is believed to be not within the intendment of the said nationalization law to include within its scope sales made to industrial or commercial users or consumers; WHEREAS, it is likewise in the interest of the national economy to exclude from the provisions of the said law the business of restaurants located in hotels, irrespective of the amount of capital, as long as the restaurant is merely incidental to the hotel business; x x x . Two additional economic activities were excluded by PD 714 from the definition of retail trade: (1) A manufacturer or processor selling to industrial and commercial users or consumers who use the products bought by them to render service to the general public and/or to produce or manufacture goods which are in turn sold by them; and (2) A hotel-owner or keeper operating a restaurant irrespective of the amount of capital, provided that the restaurant is necessarily included in, or incidental to, the hotel business.

As further discussed later in this Report, RA 1180, as amended by PD 714, was repealed on March 7, 2000 by Republic Act No. 8762. Post-Marcos Period: The 1986 Constitution7 After Ferdinand E. Marcos was deposed as President of the Philippines as a result of the peaceful revolution conducted by Filipinos in February 1986, Corazon C. Aquino took over the reigns of government as President and issued Proclamation No. 3 which ordained the adoption of a provisional constitution pending the adoption of a regular one. The same Proclamation called for an appointed Constitutional Commission to draft a

permanent constitution. The draft of the new Constitution was completed and adopted by the Commission on October 15, 1986, and was ratified by a plebiscite, and took effect, on February 2, 1987. Within this rather lengthy Constitution is a plethora of provisions dealing, directly and indirectly, with matters relevant to competition law. Some of these provisions expressly reserve to Philippine nationals certain economic activities. These provisions are all set out in Annex A to this Report. The most explicit provision dealing with monopolies and combinations in restraint of trade is Section 19 of Article XII on the National Economy and Patrimony which reads as follows SECTION 19. The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed. The Supreme Court, in the cases of Francisco S. Tatad vs. The Secretary of the Department of Energy and the Secretary of the Department of Finance, G.R. No. 124360, November 5, 1997, and Edcel C. Lagman, et al. vs. Hon. Ruben Torres, et al., G.R. No. 127867, November 5, 1997, which are discussed more extensively at the latter part of this Report, described the import of Section 19 of Article XII of the Constitution in the following language: 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. x x x Again, we underline in scarlet that the fundamental principle espoused by Section 19, Article XII of the Constitution is competition for it alone can release the creative forces of the market. But the competition that can unleash these creative forces is competition that is fighting yet is fair. Ideally, this kind of competition requires the presence of not one, not just a few but several players. A market controlled by one player (monopoly) or dominated by a handful of players (oligopoly) is hardly the market where honest-to-goodness competition will prevail. Monopolistic or oligopolistic markets deserve our careful scrutiny and laws which barricade the entry points of new players in the market should be viewed with suspicion. It also provided a definition of the terms monopoly and combination in restraint of trade: A monopoly is a privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right or power to carry on a particular business or trade, manufacture a particular article, or control the sale or the whole 8 supply of a particular commodity. It is a form of market structure in which one or only a few firms dominate the total sales of a product or service. On the other hand, a combination in restraint of trade is an agreement or understanding between two or more persons, in the form of a contract, trust, pool, holding company, or other form of association, for the purpose of unduly restricting competition, monopolizing trade and commerce in a certain commodity, controlling its production, distribution and price, or otherwise interfering with freedom of trade without statutory authority. Combination in restraint of trade

refers to the means while monopoly refers to the end. A Survey of Philippine Laws Dealing With Aspects of Anti-Trust and Competition Law Matters Price Control Measures Beginning in 1934, various laws and other issuances having the force of law were promulgated to deal with the problem of hoarding, price manipulation, speculation and monopoly of essential goods, articles and commodities: (1) Act No. 4164, approved on December 1, 1934, which penalized the excessive increase in the price of certain prime necessities of life on the occasion of a public calamity. (2) Republic Act No. 6124, approved on April 2, 1970 and in force up to June 30, 1971, which provided for the fixing of the maximum selling price of essential articles or commodities and created a Price Control Council. Articles and commodities deemed essential to the public interest were medicines, drugs and surgical supplies; food and foodstuffs; clothes, clothing, and sewing and weaving materials and supplies; fuels and lubricants; construction materials; educational supplies and equipment; and fertilizers, insecticides, pesticides and other agricultural inputs. (3) Republic Act No. 6361, approved on July 27, 1971 and in force up to June 30, 1973, which dealt with the same subject matter as, and replaced, Republic Act No. 6124. However, the list of articles and commodities deemed essential to the public interest became longer and now specifically included: optical and dental supplies; milk, soft drinks and other beverages; animal and poultry feeds and veterinary supplies; crude oil and petroleum products; office supplies and equipment; motor vehicles and spare parts,

tires, batteries, engines and other machineries; household utensils, appliances and other household necessities; and footwear including all the components thereof. (4) Presidential Decree No. 1674, issued on February 16, 1980 and repealed in 1992 by Republic Act No. 7581, which provided a mechanism for price regulation that would check price manipulation activities and at the same time afford legitimate business a fair return on investment through the exercise of reasonable regulation. In the light of increases in the price of oil products which threatened to trigger unconscionable increases in the prices 9 of prime and essential commodities as a result of speculative, monopolistic, profiteering, hoarding and other activities calculated to take advantage of the situation, it also created a price stabilization council. (5) Letter of Instruction No. 1305, issued on March 29, 1983 and repealed in 1992 by Republic Act No. 7581, which directed measures to prevent cement hoarding, price manipulation and profiteering, such as the seizure and confiscation of hoarded cement, (6) Letter on Instruction No. 1342, on July 7, 1983 and repealed in 1992 by Republic Act No. 7581, which ordered immediate measures to prevent price manipulation and to protect consumers and directed the Price Stabilization Council to increase its vigilance, particularly its price monitoring and enforcement, in order to afford maximum protection to consumers, prevent price manipulation and hoarding during the critical period of price adjustments. (7) Letter of Instruction No. 1359, issued on October 12, 1983 and repealed in 1992 by Republic Act No. 7581, which directed measures to prevent hoarding, profiteering and price manipulation, such as imprisonment, fine,

seizure of products, cancellation of permits, and loss of citizenship and deportation if the offender is a naturalized Filipino. (8) Republic Act No. 7581, approved on May 27, 1992, which declared and implemented the policy of the State (i) to ensure the availability of basic necessities and prime commodities at reasonable prices at all times without denying legitimate business a fair return on investment, and (ii) to provide effective and sufficient protection to consumers against hoarding, profiteering and cartels with respect to the supply, distribution, marketing and pricing of said goods, especially during periods of calamity, emergency, widespread illegal price manipulation and other similar situations. Section 5 of Republic Act No. 7581 describes what are considered illegal acts of price manipulation as follows: SECTION 5. Illegal Acts of Price Manipulation. Without prejudice to the provisions of existing laws on goods not covered by this Act, it shall be unlawful for any person habitually engaged in the production, manufacture, importation, storage, transport, distribution, sale or other methods of disposition of goods to engage in the following acts of price manipulation of the price of any basic necessity or prime commodity. (1) Hoarding, which is the undue accumulation by a person or combination of persons of any basic commodity beyond his or their normal inventory levels or the unreasonable limitation or refusal to dispose of, sell or distribute the stocks of any basic necessity of prime commodity to the general public or the unjustified taking out of any basic necessity or prime commodity from the channels of reproduction, trade, commerce and industry. There shall be prima facie evidence

of hoarding when a person has stocks of any basic necessity 10 or prime commodity fifty percent (50%) higher than his usual inventory and unreasonably limits, refuses or fails to sell the same to the general public at the time of discovery of the excess. The determination of a person's usual inventory shall be reckoned from the third month immediately preceding before the discovery of the stocks in case the person has been engaged in the business for at least three (3) months; otherwise, it shall be reckoned from the time he started his business. (2) Profiteering, which is the sale or offering for sale of any basic necessity or prime commodity at a price grossly in excess of its true worth. There shall be prima facie evidence of profiteering whenever a basic necessity or prime commodity being sold: (a) has no price tag; (b) is misrepresented as to its weight or measurement; (c) is adulterated or diluted; or (d) whenever a person raises the price of any basic necessity or prime commodity he sells or offers for sale to the general public by more than ten percent (10%) of its price in the immediately preceding month: Provided, That, in the case of agricultural crops, fresh fish, fresh marine products, and other seasonal products covered by this Act and as determined by the implementing agency, the prima facie provisions shall not apply; and (3) Cartel, which is any combination of or agreement between two (2) or more persons engaged in the production,

manufacture, processing, storage, supply, distribution, marketing, sale or disposition of any basic necessity or prime commodity designed to artificially and unreasonably increase or manipulate its price. There shall be prima facie evidence of engaging in a cartel whenever two (2) or more persons or business enterprises competing for the same market and dealing in the same basic necessity or prime commodity, perform uniform or complementary acts among themselves which tend to bring about artificial and unreasonable increase in the price of any basic necessity or prime commodity or when they simultaneously and unreasonably increase prices on their competing products thereby lessening competition among themselves. Laws Directly Dealing with Unfair Competition, Monopolies and Combinations in Restraint of Trade Apart from Article 186, as amended, of the Revised Penal Code, there are other laws which expressly proscribe or provide remedies against unfair competition, monopolies and combinations in restraint of trade. These laws are the following: (1) Article 28, Republic Act No. 386, as amended, approved on June 18, 1949 and effective August 30, 1950, otherwise known as the Civil Code of the Philippines 11 ARTICLE 28. Unfair competition in agricultural, commercial or industrial enterprises or in labor through the use of force, intimidation, deceit, machination or any other unjust, oppressive or highhanded method shall give rise to a right of action by the person who thereby suffers damage. (2) Article 8, Republic Act No. 6938, approved on March 10, 1990, otherwise

known as the Cooperative Code of the Philippines ARTICLE 8. Cooperatives Not in Restraint of Trade. No cooperative or method or act thereof which complies with this Code shall be deemed a conspiracy or combination in restraint of trade or an illegal monopoly, or an attempt to lessen competition or fix prices arbitrarily in violation of any of the laws of the Philippines. (3) Section 17, Republic Act No. 7925, approved on March 1, 1995, otherwise known as the Public Telecommunications Policy Act of the Philippines SECTION 17. Rates and Tariffs. The Commission shall establish rates and tariffs which are fair and reasonable and which provide for the economic viability of telecommunications entities and a fair return on their investments considering the prevailing cost of capital in the domestic and international markets. The Commission shall exempt any specific telecommunications service from its rate or tariff regulations if the service has sufficient competition to ensure fair and reasonable rates or tariffs. The Commission shall, however, retain its residual powers to regulate rates or tariffs when ruinous competition results or when a monopoly or a cartel or combination in restraint of free competition exists and the rates or tariffs are distorted or unable to function freely and the public is adversely affected. In such cases, the Commission shall either establish a floor or ceiling on the rates or tariffs. (4) Sections 2, 3 and 11, Republic Act No. 8479, approved on February 10, 1998, otherwise known as the Downstream Oil Industry Deregulation Act of 1998 SECTION 2. Declaration of Policy. It shall be the policy of the State to liberalize and deregulate the downstream oil industry in order to

ensure a truly competitive market under a regime of fair prices, adequate and continuous supply of environmentally-clean and high-quality petroleum products. To this end, the State shall promote and encourage the entry of new participants in the downstream oil industry, and introduce adequate measures to ensure the attainment of these goals. SECTION 3. Coverage. This Act shall apply to all persons or entities engaged in any and all the activities of the domestic downstream oil industry, as well as persons or companies directly importing refined petroleum products for their own use. 12 SECTION 11. Anti-Trust Safeguards. To ensure fair competition and prevent cartels and monopolies in the Industry, the following acts are hereby prohibited: (a) Cartelization which means any agreement, combination or concerted action by refiners, importers and/or dealers, or their representatives, to fix prices, restrict outputs or divide markets, either by products or by areas, or allocate markets, either by products or by areas, in restraint of trade or free competition, including any contractual stipulation which prescribes pricing levels and profit margins; (b) Predatory pricing which means selling or offering to sell any oil product at a price below the seller's or offeror's average variable cost for the purpose of destroying competition, eliminating a competitor or discouraging a potential competitor from entering the market: Provided, however, That pricing below average variable cost in order to match the lower price of the competitor and not for the purpose of destroying competition shall not be deemed predatory pricing. For purposes of this prohibition, "variable cost" as distinguished from

"fixed cost", refers to costs such as utilities or raw materials, which vary as the output increases or decreases and "average variable cost" refers to the sum of all variable costs divided by the number of units of outputs. Changes in Economic Laws and Competition Policy in Response to Globalization In response to its perceptions of its needs, the demands of globalization, its commitments under the Marrakesh Agreement Establishing the World Trade Organization, and the prodding of international financial institutions such as the World Bank and the Asian Development Bank from whom it has borrowed and proposes to borrow, the Philippines, beginning in 1986 with the administration of then President Corazon C. Aquino, accelerating with the administration of then President Fidel V. years Ramos six

later, and continuing during the shortened term of former President Joseph Ejercito Estrada, adopted new policies and enacted a host of new laws in implementation of these policies which, generally, changed the competitive environment. Some of the more important pieces of legislation affecting competition and the changes in policy they implemented are as follows: (1) Republic Act No. 7042 (RA 7042), approved on June 13, 1991, as amended by Republic Act No. 8179, approved on March 28, 1996, otherwise known as the Foreign Investments Act Prior to RA 7042, the governments view of foreign investments may be best described as negative: foreigners cannot invest in the Philippines except in certain areas. RA 7042 changed this view to a positive one: foreigners can invest in the

Philippines except in those areas reserved by the Constitution or statutes to Philippine nationals. This is expressed succinctly in Section 7 of the law which, as amended, reads as follows: Sec. 7. Foreign Investments in Domestic Market Enterprises. Non-Philippine nationals may own up to one hundred percent (100%) of 13 domestic market enterprises unless foreign ownership therein is prohibited or limited by the Constitution and existing law or the Foreign Investment Negative List under Section 8 hereof. For example, prior to RA 7042, a foreigner cannot put up a travel agency or engage in trading as these businesses were considered as adequately exploited by Philippine nationals. Now, foreigners can invest in these businesses subject only to the requirement that an investment of at least US$200,000 (which used to be US$500,000) be made. The investment requirement is reduced further to US$100,000 if the business will employ at least 50 persons or if it the business will involve advanced technology. Attached as Annex B is the Fourth Regular Foreign Investment Negative List which was promulgated by Executive Order No. 286, dated August 24, 2000, pursuant to Section 8 of RA 7042. (2) Republic Act No. 7394, approved on April 13, 1992, otherwise known as the Consumer Act of the Philippines The law declares it to be the policy of the State to protect the interests of the consumer, promote his general welfare and to establish standards of conduct for business and industry. It sets out standards on consumer product quality and safety, particularly in the areas of food, drugs, cosmetics and hazardous substances, and regulates deceptive, unfair and unconscionable sales acts and practices including those relating to weights and measures, product and service warranties,

labeling, packaging, advertising and sales promotion, repairs and credit transactions. (3) Republic Act No. 7652 (RA 7652), approved on June 4, 1993, otherwise known as the Investors Lease Act Prior to RA 7652, foreigners were allowed to lease land for an initial period of only 25 years subject to renewal, with the mutual consent of both parties, for another 25 years (see Presidential Decree No. 471, issued May 24, 1974, which fixed a maximum period for the duration of leases of private lands to aliens). RA 7652 allowed the initial term to be as long as 50 years with the possibility of an extension of such term, also upon mutual agreement of the parties, for an additional period of 25 years or a grand total of 75 years subject to the conditions, among others, that the leased area shall be used solely for the purpose of the investment and that the leased premises shall comprise such area only as may reasonably be required for the purpose of the investment. In the case of tourism projects, the lease of private lands by qualified foreign investors is limited to projects with an investment of not less than US$5 million, 70% of which shall be infused in the said project within 3 years from the signing of the lease contract. The policy of the law, as set out in Section 2 thereof, is as follows: SECTION 2. Declaration of Policy. It is hereby declared the policy of the State to encourage foreign investments consistent with the constitutional mandate to conserve and develop our own patrimony. Towards this end, the State hereby adopts a flexible and dynamic policy of the granting of long-term lease on private lands to foreign investors for the 14 establishment of industrial estates, factories, assembly or processing plants, agro-industrial enterprises, land development for industrial, or commercial

use, tourism, and other similar priority productive endeavors. (4) Republic Act No. 7653 (RA 7653), approved on June 14, 1993, otherwise known as the Bangko Sentral ng Pilipinas, or Central Bank of the Philippines, Law The new State policy is to maintain a central monetary authority that shall function and operate as an independent and accountable body in the discharge of its responsibilities concerning money, banking and credit and enjoy fiscal and administrative autonomy. Prior to RA 7653, the independence of the Central Bank of the Philippines was suspect as most of the members of its governing body, the Monetary Board, were also members of the Presidents cabinet and, therefore, more prone to political pressure. Under the new law, majority of the members are required to come from the private sector and to work on a full-time basis. (5) Republic Act No. 7721 (RA 7721), approved on May 18, 1994, sometimes called the Foreign Banks Liberalization Law Prior to RA 7721, there were only four foreign-owned banks operating branches in the Philippines: two British banks, Standard Chartered Bank (established in 1872) and Hongkong and Shanghai Bank (established in 1875), and two American banks, i.e., Citibank N.A. (established in 1902) and Bank of America N.T. & S.A. (established in 1947). RA 7721 liberalized the entry and scope of operations of foreign banks in the Philippines. Under Section 1 of the law The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos and encourage, promote, and maintain a stable, competitive, efficient, and dynamic banking and financial system that will stimulate economic growth, attract foreign investments, provide a wider variety of financial services to Philippine enterprises,

households and individuals, strengthen linkages with global financial centers, enhance the country's competitiveness in the international market and serve as a channel for the flow of funds and investments into the economy to promote industrialization. Pursuant to this policy, the Philippine banking and financial system is hereby liberalized to create a more competitive environment and encourage greater foreign participation through increase in ownership in domestic banks by foreign banks and the entry of new foreign bank branches. In allowing increased foreign participation in the financial system, it shall be the policy of the State that the financial system shall remain effectively controlled by Filipinos. There are three modes of entry for foreign banks wishing to operate in the Philippines: (i) by acquiring, purchasing or owning up to 60% of the voting stock of an existing bank; (ii) by investing in up to 60% of the voting stock of a new banking subsidiary incorporated under the laws of the Philippines; or (iii) by establishing branches with full banking authority; provided, that a 15 foreign bank may avail itself of only one mode of entry; and, provided further, that a foreign bank or a Philippine corporation may own up to 60% of the voting stock of only one domestic bank or new banking subsidiary. (Sec. 2) Today there are 10 additional foreign banks doing business in the Philippines through branches and about half a dozen others operating through investments in locally-formed banking corporations. Section 8 of RA 7721 expressly provides for the equal treatment of foreign banks: SECTION 8. Equal Treatment. Foreign banks authorized to operate under Section 2 of this Act, shall perform the same functions, enjoy

the same privileges, and be subject to the same limitations imposed upon a Philippine bank of the same category. These limits include, among others, the single borrower's limit and capital to risk asset ratio as well as the capitalization required for expanded commercial banking activities under the General Banking Act and other related laws of the Philippines. xx x Any right, privilege or incentive granted to foreign banks or their subsidiaries or affiliates under this Act, shall be equally enjoyed by and extended under the same conditions to Philippine banks. Philippine corporations whose shares of stocks are listed in the Philippine Stock Exchange or are of long standing for at least ten (10) years shall have the right to acquire, purchase or own up to sixty percent (60%) of the voting stock of a domestic bank. (6) Republic Act No. 8293, approved on June 6, 1997, otherwise known as the Intellectual Property Code of the Philippines (IPC) - The IPC repealed the Patent Law (Republic Act No. 165, approved on June 20, 1947), Trademark Law (Republic Act No. 166, approved on June 20, 1947), the Decree on Intellectual Property or the Copyright Law (Presidential Decree No. 49, issued on November 14, 1972), Compulsory Book Licensing Law (Presidential Decree No. 285,, issued on September 3, 1973), and Article 188 (on substituting and altering trademarks, trade names or service marks) and Article 189 (on unfair competition, fraudulent registration of trademark, trade name or service mark, fraudulent designation of origin, and false description) of the Revised Penal Code. The Declaration of State Policy provides that The State recognizes that an effective intellectual and industrial

property system is vital to the development of domestic and creative activity, facilitates transfer of technology, attracts foreign investments, and ensures market access for our products. It shall protect and secure the exclusive rights of scientists, inventors, artists and other gifted citizens to their intellectual property and creations, particularly when beneficial to the people, for such periods as provided in this Act. 16 The use of intellectual property bears a social function. To this end, the State shall promote the diffusion of knowledge and information for the promotion of national development and progress and the common good. It is also the policy of the State to streamline administrative procedures of registering patents, trademarks and copyright, to liberalize the registration on the transfer of technology, and to enhance the enforcement of intellectual property rights in the Philippines. (Sec. 2) (7) Republic Act No. 8555, approved on February 26, 1998 - This law amends Republic Act No. 8182, approved on June 11, 1996, which excludes Official Development Assistance (ODA) from the countrys foreign debt limit in order to facilitate the absorption and optimize the utilization of ODA resources. Section 11-A, which this law adds to Republic Act No. 8182, provides that SEC. 11-A. In the contracting of any loan, credit or indebtedness under this Act or any law, the President of the Philippines may, when necessary, agree to waive or modify the application of any provision of law granting preferences in connection with, or imposing restrictions on, the procurement of goods or services: Provided, however, That as far as practicable, utilization of the services of qualified Filipino citizens or corporations or associations owned by such citizens in the prosecution of

projects financed under this Act shall be prepared on the basis of the standards set for a particular project: Provided, further, That the matter of preference in favor of articles, materials, or supplies of the growth, production or manufacture of the Philippines, including the method or procedure in the comparison of bids for purposes therefor, shall be the subject of agreement between the Philippine Government and the lending institution. (8) Republic Act No. 8556, approved February 26, 1998, otherwise known as the Financing Company Act of 1998 - This law amends Republic Act No. 5980, as amended, approved on August 4, 1969. Its expanded Declaration of Policy, which now refers to placing the operations of financing and leasing companies on a competitive basis, reads as follows:

SECTION 2. Declaration of Policy. It is hereby declared to be the policy of the State to regulate and promote the activities of financing and leasing companies to place their operations on a sound, competitive, stable and efficient basis as other financial institutions, to recognize and strengthen their critical role in providing medium and long-term credit for investments in capital goods and equipment especially by small and medium enterprises particularly in the countryside and to curtail and prevent acts or practices prejudicial to the public interest so that they may be in a better position to extend efficient service in a fair manner to the general public and to industry, commerce and agriculture and thereby more fully contribute to the sound development of the national economy. 17 More interestingly, the equity now required to be held by Philippine nationals in financing companies was lowered from 60%, under the

old law, to 40% (Sec. 6) (9) Republic Act No. 8762 (RA 8762), approved on March 7, 2000, otherwise known as the Retail Trade Liberalization Act of 2000 - This law liberalized the retail trade business and repealed RA 1180. Section 2 of the law, declaring the States policy states that

It is the policy of the State to promote consumer welfare in attracting, promoting and welcoming productive investments that will bring down prices for the Filipino consumer, create more jobs, promote tourism, assist small manufacturers, stimulate economic growth and enable Philippine goods and services to become globally competitive through the liberalization of the retail trade sector. Pursuant to this policy, the Philippine retail industry is hereby liberalized to encourage Filipino and foreign investors to forge an efficient and competitive retail trade sector in the interest of empowering the Filipino consumer through lower prices, higher quality goods, better services and wider choices. Under Section 3(1)(d) of RA 8762, sales which are limited only to products manufactured, processed or assembled by a manufacturer through a single outlet, irrespective of capitalization, is not considered retail sales and, therefore, may be made by foreign nationals.

Moreover, under Section 5 of RA 8762, qualified foreign retailers may, upon registration with the Securities and Exchange Commission and the Department of Trade and Industry, or in case of foreign-owned single proprietorships, with the latter, engage or invest in retail enterprises in the

Philippines falling under Categories B, C and D of the classification established by the law: (a) Category B enterprises are those with a minimum paid-up capital of the equivalent in Philippine Pesos of US$2,500,000 but less than US$7,500,000. They may be wholly owned by foreigners except for the first 2 years after the effectivity of RA 8762 wherein foreign participation shall be limited to not more than 60% of total equity. (b) Category C enterprises are those with a paid-up capital of the equivalent in Philippine Pesos of US$7,500,000 or more. They may be wholly owned by foreigners; provided, however, that in no case shall the investments for establishing a store, falling under both Categories B and C, be less than the equivalent in Philippine Pesos of US$830,000. (c) Category D are enterprises specializing in high-end or luxury products, i.e., goods which are not necessary for life 18 maintenance and whose demand is generated in large part by the higher income groups including, but not limited to, products such as: jewelry, branded or designer clothing and footwear, wearing apparel, leisure and sporting goods, electronics and other personal effects. with a paid-up capital of the equivalent in Philippine Pesos of US$250,000 per store. Foreign investors acquiring shares from existing retail stores, whether or not publicly listed, whose net worth is in excess of the peso equivalent of US$2,500,000 may purchase only up to a maximum of 60% of the equity thereof within the first 2 years from the effectivity of RA 8762 and thereafter, they may acquire the remaining percentage consistent with the

allowable foreign participation as provided in the law (Sec. 6). All retail trade enterprises under Categories B and C, in which foreign ownership exceeds 80% of equity, shall offer a minimum of 30% of their equity to the public through any stock exchange in the Philippines within 8 years from their start of operations (Sec. 7). For ten (10) years after the effectivity of RA 8762, at least 30% of the aggregate cost of the stock inventory of foreign retailers falling under Categories B and C and 10% for Category D shall be made in the Philippines (Sec. 9). Qualified foreign retailers are not allowed to engage in certain retailing activities outside their accredited stores through the use of mobile or rolling stores or carts, the use of sales representatives, door-to-door selling, restaurants and sari-sari stores and such other similar retailing activities (Sec. 10). (10) Republic Act No. 8791, approved on May 23, 2000, otherwise known as the General Banking Law of 2000 - This law regulated the organization and operations of banks, quasi-banks and trust entities and repealed the old General Banking Act (Republic Act No. 337, as amended, approved July 24, 1948). Its Declaration of Policy reads as follows: SECTION 2. Declaration of Policy. The State recognizes the vital role of banks in providing an environment conducive to the sustained development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance. In furtherance thereof, the State shall promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic and responsive to the demands of a developing economy.

(11) Republic Act No. 8799, approved July 19, 2000, otherwise known as the Securities Regulation Code - This law repealed the Revised Securities Act (Batas Pambansa Blg. 178, approved on February 23, 1982). The Declaration of State Policy in Section 2 provides that 19 The State shall establish a socially conscious, free market that regulates itself, encourage the widest participation of ownership in enterprises, enhance the democratization of wealth, promote the development of the capital market, protect investors, ensure full and fair disclosure about securities, minimize if not totally eliminate insider trading and other fraudulent or manipulative devices and practices which create distortions in the free market. (12) Republic Act No. 8800, approved July 19, 2000, otherwise known as the Safeguard Measures Act - This law, which applies to products being imported into the Philippines irrespective of source, was enacted to minimize, if not prevent, the destruction of local industries buffeted by the strong winds of globalization. Its Declaration of Policy states that The State shall promote the competitiveness of domestic industries and producers based on sound industrial and agricultural development policies, and the efficient use of human, natural and technical resources. In pursuit of this goal and in the public interest, the State shall provide safeguard measures to protect domestic industries and producers from increased imports which cause or threaten to cause serious injury to those domestic industries and producers. (Sec. 2) Proposed Competition Laws At the Eleventh Congress of the Philippines House of Representatives, there were six (6) bills filed dealing with various aspects of competition law. All have not gone

beyond first reading and none has been reported out by the House Committees to which they have been referred. Starting with the oldest of the bills, these are: (a) House Bill No. 183, filed on July 1, 1998, entitled An Act Penalizing Unfair Trade Practices And Combinations In Restraint Of Trade, Creating The Fair Trade Commission, Appropriating Funds Therefor, And For Other Purposes The focus of this bill is on the criminalization of certain unlawful business practices and the creation of a Fair Trade Commission. (b) House Bill No. 271, filed on July 1, 1998, entitled An Act Providing For Antitrust Penalties The language of Sections 1 and 2 of this bill is virtually identical with the language of Sections 1 and 2 of the Sherman Act of 1890. It also provides for the award of treble damages to the injured party. (c) House Bill No. 1373, filed on July 28, 1998, entitled An Act Penalizing Unfair Trade Practices And Combinations In Restraint Of Trade, Creating The Fair Trade Commission, Appropriating Funds Therefor, And For Other Purposes This bill is similar to House Bill No. 183 (d) House Bill No. 4455, filed on October 13, 1998, entitled An Act Prescribing A Fair Competition Law, Its Enforcement, The Establishment Of A Fair Trade Commission, Delineating Its Powers And Functions, And For Other Purposes Compared with the other bills on the same subject filed earlier, this bill is longer and more detailed. Interestingly, it contains a provision 20 specifying the instances when the acquisition or maintenance of monopoly power is not to be interpreted as a violation of the prohibition against monopolies and cartels. These situations are when the monopoly is (i) authorized by law, (ii) attained or maintained through superior skill, (iii) acquired or maintained in exploitation of ones duly registered patent,

copyright, trademark, trade name, musical works and compositions, or other intellectual property, and (iv) acquired or maintained in the exercise of ones contractual rights. (e) House Bill No. 5281, filed on November 12, 1998, entitled An Act Creating A Special Body That Shall Regulate And Exercise Authority Over Monopolistic Practices, Combinations In Restraint Of Trade And Unfair Competition As Hereinafter Defined And Appropriating Funds Therefor It provides, among others, for the creation of a Philippine Antitrust Commission. (f) House Bill No. 8790, filed on November 16, 1999, entitled An Act Prohibiting Monopolies, Attempt To Monopolize An Industry Or Line Of Commerce, Manipulation Of Prices Of Commodities, Asset Acquisition And Interlocking Memberships In The Board Of Directors Of Competing Corporate Bodies And Price Discrimination Among Customers, Providing Penalties Therefor And For Other Purposes There are two interesting provisions in this bill: the first one expressly authorizes the Government to file a civil action against the defendant, in the concept of parens patriae and on behalf of natural persons residing in the Philippines, to secure treble damages for any monetary injury sustained by such natural persons by reason of any violation of the proposed law, and the second one authorizes a consent judgment upon application by the Government in a civil action brought by or on behalf of the Republic of the Philippines, which consent judgment shall not be used in another action or proceeding against the defendant. At least three (3) bills, similar to some of the foregoing House Bills, were filed in the Philippines Senate. They have not also gone beyond first reading and none of them has been reported out by the Senate Committees to which they have been referred. These bills

are the following: (a) Senate Bill No. 150, filed on June 30, 1998, entitled An Act Creating The Fair Trade Commission, Prescribing Its Powers And Functions In Regulating Trade Competition And Monopolies, And For Othe r Purposes Unique to this bill is the provision requiring that the Fair Trade Commission be apprised before certain trusts are formed. Trusts that have received a favorable ruling from the Commission may not be challenged under the proposed law. (b) Senate Bill No. 862, filed on July 17, 1998, entitled An Act Providing For A More Effective Implementation Of The Constitutional Mandate Against Monopolies, Combinations In Restraint Of Trade And Unfair Competition By Re-Defining And Strengthening Existing Laws, Processes, And For Other Purposes At 59 Sections, this is the longest bill on the subject filed 21 in both the Senate and the Houses of Representatives. It contains a detailed enumeration of prohibited or unlawful acts and courses of conduct (i) in trade, commerce and industry in general, (ii) in the telecommunication and public utility sectors, (iii) in the banking sector, and (iv) among corporations. It establishes an Antitrust Commission and describes in detail its structural organization, powers and functions. (c) Senate Bill No. 1792, filed on November 3, 1999, entitled An Act Prohibiting Monopolies, Attempt To Monopolize An Industry Or Line Of Commerce, Manipulation Of Prices Of Commodities, Asset Acquisition And Interlocking Memberships In The Board Of Directors Of Competing Corporate Bodies And Price Discrimination Among Customers, Providing Penalties Therefor, And For Other Purposes This bill is similar to House Bill No. 8790 and appears to be its counterpart in the Senate.

In a letter addressed to Senator Ramon B. Magsaysay, Jr., dated October 24, 2000, Chairperson Lilia R. Bautista of the Philippines Securities and Exchange Commission (SEC), apparently in reply to Senator Magsaysays question on the possibility of consolidating the three Senate bills mentioned above, made the following comments: 1. Should the proposed law adopt the US anti-trust legislation or the European restrictive business practice approach as reflected in the Treaty of Rome of the European Union? 2. Considering that there is already an existing price control law, it may not be necessary to recreate the same in an anti-trust legislation. 3. Most countries have separate laws for anti-trust and consumer protection and the Philippines might want to follow suit particularly because it already has consumer protection laws. 4. Perhaps new institutions, e.g., a Fair Trade Commission or an Anti-Trust Commission, need not be created. Instead, existing government agencies performing similar functions could simply be strengthened and vested with more authority to enforce the proposed legislation. This approach is also in line with the goal of Government to streamline the bureaucracy and reduce the budgetary deficit by reducing the size of its present workforce. Chairperson Bautista also expressed reservations about the provisions in Senate Bills Nos. 862 and 1792 dealing with (i) inter-locking directorships, (ii) parentsubsidiary corporate relationship, and (iii) stock ownership in different corporations: 1. Inter-locking directorships - It is not unusual to find directors occupying the same positions in another corporation. Usually, we often find interlocking directors in a parent-subsidiary relationship between corporations wherein they transact business with one another on a regular basis for some legitimate

business reasons, not only because one has big investments therein but also because their services may have proven to be valuable and efficient. Because 22 of this business reality, it would be impractical to absolutely prevent interlocking directorship. The people who are sought to be prohibited from sitting in the board may be the same people who contributed to the competence or technical expertise that result to the growth of the business. 2. Parent-subsidiary corporate relationship - It is a well-recognized fact that a person has the right to choose his business associates. Thus, the formation of a close corporation is given special recognition under the Corporation Code, taking into consideration that close corporations have special legitimate needs different from those of widely held corporations, relaxing in their favor some of the general rules and requirements applicable to all business corporations. Where business associates belong to a small, closely-knit group, like a family, they usually prefer to keep the organization exclusive and would not welcome strangers. Since it is through their efforts and managerial skills that they expect the business to grow and prosper, it is quite understandable that they would not trust outsiders to come in and interfere with their management thereof, and much less share whatever fortune, big or small, that business may bring. Thus, recognizing the unique quality and legitimate needs of close corporations, the Corporation Code allows investors to form close corporations limiting, the shareholders to members of the family or close business associates with whom they have trust and confidence. Under Section 96 of the Corporation Code, any corporation may be incorporated as a close corporation except the following: mining or oil companies, stock exchanges, banks, insurance companies, public utilities, educational institutions and corporations declared to be vested with public interest

pursuant to Section 140 of the Code. 3. Stock ownership in different corporations - At present there are certain business activities wherein only few investors are willing or capable of investing into and which can be undertaken by only few moneyed or competent investors. Prohibiting stock ownership in different corporations might shy away willing investors who have capability of investing and whose efficient management skills, competence or technical expertise can contribute to economic recovery of the country. Such an idea would discourage existing big corporations from forming business subsidiaries and therefore would run counter to the policy of the government to liberalize business in order to promote investments in the country. In sum, the SEC believes that it would be impractical to adopt laws on monopolies of general application to all sectors of the economy considering business realities in the country and the present economic situation. According to Chairperson Bautista, it is not the opportune time to absolutely prohibit interlocking directorship, parent-subsidiary relationships or formation of close corporations. What is needed is an Anti-Trust law which initially focuses on the prevention of cartels on basic products and industries (e.g., rice, corn, fish) which are of utmost importance to national interest. The Eleventh Congress is now in recess and will resume for a short period on June 4 to 7, 2001 to tackle bills certified by the President as urgent (e.g., the power deregulation 23 bill). Upon the end of term of the Eleventh Congress sometime in July 2001, all the House and Senate Bills mentioned above would be deemed archived and would have to be refiled

when the Twelfth Congress opens. The chances of any of these bills becoming law this year are dim. The administration of newly installed President Gloria Macapagal-Arroyo has not indicated that the enactment of an anti-trust law, much less a broader competition law, is in its list of priority legislation. The Supreme Court on Monopolies and Combinations in Restraint of Trade There are less than a handful of cases that have reached the Supreme Court of the Philippines dealing with monopolies and combinations in restraint of trade, as mentioned earlier, 12 notwithstanding the fact that the basic law on the subject, Article 186 of the Revised Penal Code, has been in the statute books for more than 69 years (close to 114 years if one were to trace back the provision to the Old Penal Code). And what the Minister of Justice stated in 1983 about no business enterprise has yet been indicted under the anti-trust provisions of the Revised Penal Code 13 remains to be a correct statement. Few as the cases may be, the Supreme Court has had occasion in five cases, the last of which was decided in December 1999, to speak on the subject of monopolies and combinations in restraint of trade. These cases are briefly discussed below. (1) Combination in restraint of trade - Is Article 22 of the constitution of the Philippine Rating Bureau, which provides that the members of the Bureau "agree not to represent nor to effect reinsurance with, nor to accept reinsurance from any company, body,

or underwriter, licensed to do business in the Philippines not a member in good standing of the Bureau", illegal as a combination in restraint of trade? The Philippines Supreme Court, in the case of Filipinas Compaia de Seguros, et al., vs. Hon. Francisco Y. Mandanas, et al., G.R. No. L-19638, June 20, 1966, ruled that the said Article 22 is not illegal as a combination in restraint of trade and that it finds nothing unlawful, or immoral, or unreasonable, or contrary to public policy, either in the objectives sought to be attained by the Bureau, or in the means availed of to achieve the said objectives, or in the consequences of the accomplishment thereof. According to the Court, the purpose of said Article 22 is not to eliminate competition, but to promote ethical practices among non-life insurance companies, although, incidentally, it may discourage, and, hence, eliminate unfair competition, through underrating, which, in itself, is eventually injurious to the public. The Court quoted with approval the words of Mr. Justice Brandeis in the case of Board of Trade of Chicago vs. U.S., 246 U.S. 231, 62 Led. 683 (1918): " . . . the legality of an agreement or regulation cannot be determined by so simple a test, as whether it restrains competition. Every agreement concerning trade, every regulation of trade, restrains. To bind, to restrain, is of their very essence. The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition, or whether it is such as may suppress or even destroy competition. To determine that question the court must ordinarily consider the facts peculiar to the business to which the restraint is applied; its

12

See p. 4. 13 Id. 24 condition before and after the restraint was imposed; the nature of the restraint, and its effect, actual or probable." It went on to quote the U. S. Supreme Court in Sugar Institute, Inc. vs. U.S., 297 U.S. 553 as follows: "The restrictions imposed by the Sherman Act are not mechanical or artificial. We have repeatedly said that they set up the essential standard of reasonableness. Standard Oil Co. vs. United States, 221 U.S. 1, 55 L. ed. 619 31 S. Ct. 502, 34 L.R.A. (N.S.) 834, Ann. Cas. 1912D, 734, United States vs. American Tobacco Co., 221 U.S. 106, 55 L. ed. 663, 31 S. Ct. 632. They are aimed at contracts and combinations which 'by reason of intent or the inherent nature of the contemplated acts, prejudice the public interests by unduly restraining competition or unduly obstructing the course of trade.' Nash vs. United States, 229 U.S. 373, 376, 57 L. ed. 1232, 1235, 33 S. Ct. 780; United States vs. American Linseed Oil Co., 262 U.S. 371, 388, 389, 67 L. ed. 1035, 1040, 1041, 43 S. Ct. 607. Designed to frustrate unreasonable restraints, they do not prevent the adoption of reasonable means to protect interstate commerce from destructive or injurious practices and to promote competition upon a sound basis. Voluntary action to end abuses and to foster fair competitive opportunities in the public interest may be more effective than legal processes. And cooperative endeavor may appropriately have wider objectives than merely the removal of evils which are infractions of positive law." (2) Combinations in restraint of trade and interlocking directorates - In the leading case of John Gokongwei, Jr. vs. Securities And Exchange Commission, et al., G.R. No. L-

45911, April 11, 1979, petitioner Gokongwei sought, among others, to declare null and void the amended by-laws of San Miguel Corporation (SMC) which disqualifies any stockholder engaged in any business that competes with or is antagonistic to that of SMC from being nominated or elected to the SMC Board of Directors. In its defense, SMC contends that exclusion of a competitor from its Board is a legitimate corporate purpose considering that, being a competitor, Gokongwei cannot devote an unselfish and undivided loyalty to SMC; that it is essentially a preventive measure to assure stockholders of SMC of reasonable protection from the unrestrained self-interest of those charged with the promotion of the corporate enterprise; that access to confidential information by a competitor, such as Gokongwei, may result either in the promotion of the interest of the competitor at the expense of SMC, or the promotion of both the interests of Gokongwei and SMC, which may, therefore, result in a combination or agreement in violation of Article 186 of the Revised Penal Code by destroying free competition to the detriment of the consuming public. The Supreme Court ruled in favor of SMC and stated that anti-trust laws or laws against monopolies or combinations in restraint of trade are aimed at raising levels of competition by improving the consumers' effectiveness as the final arbiter in free markets. These laws are designed to preserve free and unfettered competition as the rule of trade. They operate to forestall concentration of economic power. The law against monopolies and combinations in restraint of trade is aimed at contracts and combinations that, by reason of the inherent nature of the contemplated acts, prejudice the public interest by

unduly restraining competition or unduly obstructing the course of trade. 25 The Court went on and observed that The terms "monopoly", "combination in restraint of trade" and "unfair competition" appear to have a well defined meaning in other jurisdictions. A "monopoly" embraces any combination the tendency of which is to prevent competition in the broad and general sense, or to control prices to the detriment of the public. In short, it is the concentration of business in the hands of a few. The material consideration in determining its existence is not that prices are raised and competition actually excluded, but that power exists to raise prices or exclude competition when desired. Further, it must be considered that the idea of monopoly is now understood to include a condition produced by the mere act of individuals. Its dominant thought is the notion of exclusiveness or unity, or the suppression of competition by the unification of interest or management, or it may be thru agreement and concert of action. It is, in brief, unified tactics with regard to prices. According to the Court, The election of petitioner to the Board of respondent Corporation can bring about an illegal situation. This is because an express agreement is not necessary for the existence of a combination or conspiracy in restraint of trade. It is enough that a concert of action is contemplated and that the defendants conformed to the arrangements, and what is to be considered is what the parties actually did and not the words they used. For instance, the Clayton Act prohibits a person from serving at the same time as a director in any two or more corporations, if such corporations are, by virtue of their business and location of operation, competitors so that the elimination of competition between them would constitute violation of any provision of the anti-trust laws. There is here a statutory recognition of the anticompetitive dangers which may arise when an individual simultaneously acts as a

director of two or more competing corporations. A common director of two or more competing corporations would have access to confidential sales, pricing and marketing information and would be in a position to coordinate policies or to aid one corporation at the expense of another, thereby stifling competition. This situation has been aptly explained by Travers, thus: "The argument for prohibiting competing corporations from sharing even one director is that the interlock permits the coordination of policies between nominally independent firms to an extent that competition between them may be completely eliminated. Indeed, if a director, for example, is to be faithful to both corporations, some accommodation must result. Suppose X is a director of both Corporation A and Corporation B. X could hardly vote for a policy by A that would injure B without violating his duty of loyalty to B; at the same time he could hardly abstain from voting without depriving A of his best judgment. If the firms really do compete in the sense of vying for economic advantage at the expense of the other there can hardly be any reason for an interlock between competitors other than the suppression of competition." According to the Report of the House Judiciary Committee of the U. S. Congress on Section 9 of the Clayton Act, it was established that: "By means of the interlocking directorates one man or group of men have been able to dominate and control a great number of corporations . . . to the detriment of the small ones dependent upon them and to the injury of the public." 26 Shared information on cost accounting may lead to price fixing. Certainly, shared information on production, orders, shipments, capacity and inventories may lead to control of production for the purpose of controlling prices. Obviously, if a competitor has access to the pricing policy and cost

conditions of the products of San Miguel Corporation, the essence of competition in a free market for the purpose of serving the lowest priced goods to the consuming public would be frustrated. The competitor could so manipulate the prices of his products or vary its marketing strategies by region or by brand in order to get the most out of the consumers. Where the two competing firms control a substantial segment of the market this could lead to collusion and combination in restraint of trade. Reason and experience point to the inevitable conclusion that the inherent tendency of interlocking directorates between companies that are related to each other as competitors is to blunt the edge of rivalry between the corporations, to seek out ways of compromising opposing interests, and thus eliminate competition. As respondent SMC aptly observes, knowledge by CFCRobina of SMC's costs in various industries and regions in the country will enable the former to practice price discrimination. CFC-Robina can segment the entire consuming population by geographical areas or income groups and charge varying prices in order to maximize profits from every market segment. CFC-Robina could determine the most profitable volume at which it could produce for every product line in which it competes with SMC. Access to SMC pricing policy by CFCRobina would in effect destroy free competition and deprive the consuming public of opportunity to buy goods of the highest possible quality at the lowest prices. (3) Monopolies - In the case of Philippine Ports Authority vs. Hon. Rafael L. Mendoza, et al., G.R. No. L-48304, September 11, 1985, the policy of integration in the port of Cebu City adopted by the Philippine Ports Authority (PPA) was declared by the Supreme Court as not violative of any constitutional and legal provision on monopolies. The said policy required that there should be only one arrastre or stevedore operator or contractor to engage in cargo handling services in the port and that, conformably with this

policy, it would be necessary that any two or more contractors presently operating within the same port premises who desire to continue or renew their cargo handling services must merge into only one organization within a prescribed period after receipt of due notice from the PPA. The Supreme Court declared that Private monopolies are not necessarily prohibited. The use of the word "regulate" in the Constitution indicates that some monopolies, properly regulated, are allowed. Regulate means includes the power to control, to govern, and to restrain, but regulate should not be construed as synonymous with suppress or prohibit (Kwong Sing vs. City of Manila, 41 Phil. 108). "Competition can best regulate a free economy. Like all basic beliefs, however, that principle must accommodate hard practical experience. There are areas where for special reasons the force of competition, when left wholly free, might operate too destructively to safeguard the public interest. Public utilities are an instance of that consideration." (Oleck, Modern Corporation Law, Vol. IV, p. 197). By their very nature, certain public services or public utilities such as those which supply water, electricity, transportation, telegraph, etc. must be given exclusive franchises if public interest is to be served. Such exclusive franchises are not violative of the law against monopolies (Anglo-Fil Trading Corporation vs. Lazaro, supra). 27 In the case at bar, the area affected is maritime transportation in the port of Cebu. The operations there, particularly arrastre and stevedoring, affect not only the City of Cebu, the principal port in the South, but also the economy of the whole country as well. Any prolonged disjunction of the services being rendered there will prejudice not only inter-island and international trade and commerce. Operations in said port are therefore imbued with public interest and are subject to regulation and control for the public good and welfare. PPA's policy of integration

through compulsory merger may not even be in this instance considered as promoting a monopoly because the fact of the matter is that while the sole operator permitted by PPA to engage in the arrastre and stevedoring operations in the port of Cebu is only USDI, actually USDI is comprised of the eleven (11) port services contractors that previously used said ports but decided to merge and ultimately constituted themselves as USDI. (4) Monopolies, anti-competitive behavior and predatory pricing - The downstream oil industry in the Philippines, prior to 1996, was heavily regulated and subject to price control. To deregulate the industry, Republic Act No. 818 0 (RA 1180), otherwise known as the Downstream Oil Industry Deregulation Act of 1996 was enacted on March 28, 1996. The constitutionality of the law was challenged by some legislators before the Supreme Court in the cases of Francisco S. Tatad vs. The Secretary of the Department of Energy and the Secretary of the Department of Finance, G.R. No. 124360, November 5, 1997, and Edcel C. Lagman, et al. vs. Hon. Ruben Torres, et al., G.R. No. 127867, November 5, 1997. The Supreme Court ruled in favor the petitioners and declared RA 1180 as unconstitutional because, as summarized by Justice Consuelo YaresSantiago in the case of Congressman Enrique T. Garcia vs. Hon. Renato C. Corona, et al., G.R. No. 132451, December 17, 1999, its provisions on tariff differential, stocking of inventories, and predatory pricing inhibit fair competition, encourage monopolistic power, and interfere with the free interaction of the market forces. These provisions, and the Supreme Courts comments thereon, are as follows:

(a) Section 5(b) on tariff differential Any law to the contrary notwithstanding and starting with the effectivity of this Act, tariff shall be imposed and collected on imported crude oil at the rate of three percent (3%) and imported refined petroleum products at the rate of seven percent (7%), except fuel oil and LPG, the rate for which shall be the same as that for imported crude oil Provided, That beginning on January 1, 2004 the tariff rate on imported crude oil and refined petroleum products shall be the same: Provided, further, That this provision may be amended only by an Act of Congress. Said the Supreme Court: In the cases at bar, it cannot be denied that our downstream oil industry is operated and controlled by an oligopoly, a foreign oligopoly at that. Petron, Shell and Caltex stand as the only major league players in the oil market. All other players belong to the Lilliputian league. As the dominant players, Petron, Shell and Caltex boast of existing refineries of various capacities. The tariff differential of 4% therefore works to their immense benefit. Yet, this is only one edge of the tariff differential. The other edge cuts and cuts deep in the heart of their competitors. It erects a high barrier to the entry of new players. New players that intend to equalize the market power of Petron, 28 Shell and Caltex by building refineries of their own will have to spend billions of pesos. Those who will not build refineries but compete with them will suffer the huge disadvantage of increasing their product cost by 4%. They will be competing on an uneven field. The argument that the 4% tariff differential is desirable because it will induce prospective players to invest in refineries puts the cart before the horse. The first need is to attract new players and they cannot be attracted by burdening them with heavy

disincentives. Without new players belonging to the league of Petron, Shell and Caltex, competition in our downstream oil industry is an idle dream. (b) Section 6 on inventory requirement To ensure the security and continuity of petroleum crude and products supply, the DOE shall require the refiners and importers to maintain a minimum inventory equivalent to ten percent (10%) of their respective annual sales volume or forty (40) days of supply, whichever is lower. Commented the Supreme Court: The provision on inventory widens the balance of advantage of Petron, Shell and Caltex against prospective new players. Petron, Shell and Caltex can easily comply with the inventory requirement of R.A. No. 8180 in view of their existing storage facilities. Prospective competitors again will find compliance with this requirement difficult as it will entail a prohibitive cost. The construction cost of storage facilities and the cost of inventory can thus scare prospective players. Their net effect is to further occlude the entry points of new players, dampen competition and enhance the control of the market by the three (3) existing oil companies. (c) Section 9(b) on predatory pricing To ensure fair competition and prevent cartels and monopolies in the downstream oil industry, the following acts are hereby prohibited: (a) x x x. (b) Predatory pricing which means selling or offering to sell any product at a price unreasonably below the industry average cost so as to attract customers to the detriment of competitors. Explained the Supreme Court: Finally, we come to the provision on predatory pricing x x x. Respondents

contend that this provision works against Petron, Shell and Caltex and protects new entrants. The ban on predatory pricing cannot be analyzed in isolation. Its validity is interlocked with the barriers imposed by R.A. No. 8180 on the entry of new players. The inquiry should be to determine whether predatory pricing on the part of the dominant oil companies is encouraged by the provisions in the law blocking the entry of new players. Text-writer Hovenkamp, 36 gives the authoritative answer and we quote: "The rationale for predatory pricing is the sustaining of losses today that will give a firm monopoly profits in the future. The monopoly profits will never materialize, however, if the market is flooded with new entrants as soon as the successful predator attempts to raise its 29 price. Predatory pricing will be profitable only if the market contains significant barriers to new entry." As aforediscussed, the 4% tariff differential and the inventory requirement are significant barriers which discourage new players to enter the market. Considering these significant barriers established by R.A. No. 8180 and the lack of players with the comparable clout of PETRON, SHELL and CALTEX, the temptation for a dominant player to engage in predatory pricing and succeed is a chilling reality. Petitioners' charge that this provision on predatory pricing is anti-competitive is not without reason. The final question resolved by the Supreme Court in these cases is whether the offending provisions of RA 1180 can be individually struck down without invalidating the entire law. The Court held that, the separability clause notwithstanding, . . . the offending provisions of R.A. No. 8180 so permeate its essence that the entire law has to be struck down. The provisions on tariff differential,

inventory and predatory pricing are among the principal props of R.A. No. 8180. Congress could not have deregulated the downstream oil industry without these provisions. Unfortunately, contrary to their intent, these provisions on tariff differential, inventory and predatory pricing inhibit fair competition, encourage monopolistic power and interfere with the free interaction of market forces. (5) Deregulation, price controls and competition - As a result of the decision of the Supreme Court in the Tatad/Lagman cases declaring RA 8180 unconstitutional, the Congress of the Philippines quickly enacted Republic Act No. 8479 (RA 8479) otherwise known as the Downstream Oil Industry Deregulation Act of 1998, on February 10, 1998. This new deregulation law no longer contained the offending provisions of RA 8180. The constitutionality of this law was then challenged in the case of Congressman Enrique T. Garcia vs. Hon. Renato C. Corona, et al., G.R. No. 132451, December 17, 1999. Petitioner Garcia, a member of the House of Representatives, sought to declare Section 19 of RA 8479, which sets the time for the full deregulation of the industry, as unconstitutional. Section 19 reads as follows: SECTION 19. Start of Full Deregulation. Full deregulation of the Industry shall start five (5) months following the effectivity of this Act: Provided, however, That when the public interest so requires, the President may accelerate the start of full deregulation upon the recommendation of the DOE and the Department of Finance (DOF) when the prices of crude oil and petroleum products in the world market are declining and the value of the peso in relation to the US dollar is stable, taking into account relevant trends and prospects: Provided, further, That the foregoing provision notwithstanding, the five (5)-

month Transition Phase shall continue to apply to LPG, regular gasoline and kerosene as socially-sensitive petroleum products and said petroleum products shall be covered by the automatic pricing mechanism during the said period. Upon the implementation of full deregulation as provided herein, the Transition Phase is deemed terminated and the following laws are repealed: a) Republic Act No. 6173, as amended; b) Section 5 of Executive Order No. 172, as amended; 30 c) Letter of Instruction No. 1431, dated October 15, 1984; d) Letter of Instruction No. 1441, dated November 20, 1984, as amended; e) Letter of Instruction No. 1460, dated May 9, 1985; f) Presidential Decree No. 1889; and g) Presidential Decree No. 1956, as amended by Executive Order No. 137: Provided, however, That in case full deregulation is started by the President in the exercise of the authority provided in this Section, the foregoing laws shall continue to be in force and effect with respect to LPG, regular gasoline and kerosene for the rest of the five (5)-month period. The contention of Petitioner Garcia, as stated by the Court in its decision, was as follows: Petitioner contends that Section 19 of R.A. 8479, which prescribes the period for the removal of price control on gasoline and other finished products and for the full deregulation of the local downstream oil industry, is patently contrary to public interest and therefore unconstitutional because within the short span of five months, the market is still dominated and controlled by an oligopoly of the three (3) private respondents, namely, Shell, Caltex and Petron.

The objective of the petition is deceptively simple. It states that if the constitutional mandate against monopolies and combinations in restraint of trade is to be obeyed, there should be indefinite and open-ended price controls on gasoline and other oil products for as long as necessary. This will allegedly prevent the Big 3 Shell, Caltex and Petronfrom price-fixing and overpricing. Petitioner calls the indefinite retention of price controls as partial deregulation. In its reply to Petitioner Garcias argument, the Court emphasized that it is not concerned with whether or not there should be deregulation. The same is a matter outside its jurisdiction: Unquestionably, the direction towards which the nations efforts at economic and social upliftment should be addressed is a function of Congress and the President. In the exercise of this function, Congress and the President have obviously determined that speedy deregulation is the answer to the acknowledged dominion by oligopolistic forces of the oil industry. Thus, immediately after R.A. 8180 was declared unconstitutional in the Tatad case, Congress took firm steps to fashion new legislation towards the objective of the earlier law. Invoking the Constitution, petitioner now wants to slow down the process. In conclusion, the Court declared: Reduce to its basic arguments, it can be seen that the challenge in this petition is not against the legality of deregulation. Petitioner does not expressly challenge deregulation. The issue, quite simply, is the timeliness or the wisdom of the date when full deregulation should be effective. 31 In this regard, what constitutes reasonable time is not for judicial

determination. Reasonable time involves the appraisal of a great variety of relevant conditions, political, social and economic. They are not within the appropriate range of evidence in a court of justice. It would be an extravagant extension of judicial authority to assert judicial notice as the basis for the determination. CONCLUSION The formulation of policies and solutions to problems relating to competition cannot be made properly without adequate empirical studies. Most literature on the subject dealt with the Philippine economy as a whole or a sector or sub-sector thereof, e.g., banking, inter-island shipping, textile manufacturing, and the electric power industry. Others were studies on the political economy. These studies describe the barriers to entry in the Philippine market and the structures of the said market. 14 More recently, a series of discussion papers dealing with the issue of competition generally and in respect of specific sectors of the Philippine economy were released by the Philippine APEC Study Center Network (PASCN). Some of these papers, which are preliminary in character and admittedly subject to further revisions, are as follows: 1. Recommendations for Philippine Anti-Trust Policy and Regulation by Anthony R.A. Abad, PASCN Discussion Paper No. 2000-09, January 2000 This study reviews existing anti-trust laws and regulations in the Philippines, examines their effectiveness and adequacy and how well they conform with international rules, and makes recommendations for a new legal and regulatory framework for anti-trust enforcement in the Philippines based on the structure for a competition law suggested by the report of the World Bank

and the Organization for Economic Cooperation and Development entitled A Framework for the Design and Implementation of Competition Law and Policy. 2. Analysis of the State of Competition and Market Structure of the Banking and Insurance Sectors by Ma. Melanie R.S. Milo, PASCN Discussion Paper No. 2000-11, October 2000 This paper looks at how competition and efficiency in the financial services sector, particularly the banking and insurance industries, have been affected by the regulatory regime and market structure. It concludes that while there have been extensive reforms in the financial sector, particularly in banking, the reform process is not yet complete. More particularly, an appropriate balance between prudential and efficiency objectives has to be achieved. 3. The State of Competition and Market Structure of the Philippine Air Transport Industry by Myrna S. Austria, PASCN Discussion Paper No. 2000-

14 See section surveying Philippine literature in the field of industrial organization at pp. 1-21 of Vol. II, Barriers to Entry Study, April 1992, Final Report, prepared by SGV Consulting for the U.S. Agency for International Development. 32 12, November 2000 This study finds that significant competition in the domestic air transport industry has been brought about by the liberalization and deregulation policies and regulations of the Government and that this has resulted in lower air fares and improvements in service and efficiency. However, the international air transport segment of the industry still has to be liberalized. Promotion of competition in this segment is imperative.

4. The State of Competition in the Philippine Manufacturing Industry by Rafaelita A. Mercado-Aldaba, PASCN Discussion Paper No. 2000-13, December 2000 The study observes that even after 20 years of trade liberalization the real growth of the manufacturing sector has been slow and no major increase in the size of the industry has been perceived. The industry studies reviewed in this paper show that the industry is still characterized by heavy protection and regulation and high concentration. It concludes that liberalization does not, by itself, guarantee competition and that the absence of competition laws would make it difficult to control possible abuses of their dominant positions by large firms. 5. Competition Policy for the Philippine Downstream Oil Industry by Peter Lee U, PASCN Discussion Paper No. 2000-14, April 2000 This paper studies the developments in the industry before and after deregulation, starting with the original Downstream Oil Industry Deregulation Act (Republic Act No. 8180) which the Philippine Supreme Court struck down as unconstitutional in November 1997, and then the Downstream Oil Industry Deregulation Act of 1998 (Republic Act No. 8479). It also discusses the bill recently filed in the Senate and the House of Representatives which proposes the establishment of a National Oil Exchange which would purchase all the requirements for refined products in the country and resell them to local companies for distribution. Finally, it examines the experience of other countries, such as Thailand and New Zealand, in regulating their downstream oil industry. 6. Competition in Philippine Telecommunications: A Survey of Critical Issues by Ramonette B. Serafica, PASCN Discussion Paper No. 2000-15, February 2000 The liberalization of the telecommunications sector effected by the administration of former President Fidel V. Ramos was quite a success but

more has to be done in terms of establishing competition rules to enhance and safeguard the competitive process in order to create a strong competitive environment in the industry. The importance of the continued accumulation of relevant and accurate economic and business data and the preparation of thorough studies of the economy and its various sectors, sub-sectors and industries in the formulation of competition policy, the enactment of laws to implement such policies, and the judicial determination of the constitutional validity of those policies and laws cannot be overemphasized. More needs to be done but nothing is more important at this time than the enactment of a general competition law suitable for the country. In the process of having such a law enacted, it is the hope that an intelligent and rational discussion of the issues surrounding competition law and the policy 33 choices that would have to be made could be had and that there would be full and active participation by all affected sectors.1 ANNEX A The ASEAN Competition Law Project: The Philippines Report

Provisions of THE 1986 CONSTITUTION OF THE REPUBLIC OF THE PHILIPPINES Relevant to Competition Law Article II Declaration of Principles and State Policies

SECTION 19. The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos. SECTION 20. The State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments. Article VI The Legislative Department SECTION 28. (2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government. Article XII National Economy and Patrimony SECTION 1. The goals of the national economy are 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 raising the quality of life for all, especially the underprivileged. The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform, through industries that make full and efficient use of human and natural resources, and which are competitive in both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign competition and trade practices. In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to develop. Private enterprises, including corporations, cooperatives, and similar collective organizations, shall be encouraged to

broaden the base of their ownership. 2 SECTION 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant. The State shall protect the nation's marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens. The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fishworkers in rivers, lakes, bays, and lagoons.

The President may enter into agreements with foreign-owned corporations involving either development, technical of financial assistance for large-scale exploration,

and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In such agreements, the State shall promote the development and use of local scientific and technical resources. The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution. SECTION 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands, and national parks. Agricultural lands of the public domain may be further classified by law according to the uses which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof by purchase, homestead, or grant. Taking into account the requirements of conservation, ecology, and development, and subject to the requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public domain which may be acquired, developed, held, or leased and the conditions therefor. 3

SECTION 4. The Congress shall, as soon as possible, determine by law the specific limits of forest lands and national parks, marking clearly their boundaries on the ground. Thereafter, such forest lands and national parks shall be conserved and may not be increased nor diminished, except by law. The Congress shall provide, for such period as it may determine, measures to prohibit logging in endangered forests and watershed areas. SECTION 5. The State, subject to the provisions of this Constitution and national development policies and programs, shall protect the rights of indigenous cultural communities to their ancestral lands to ensure their economic, social, and cultural wellbeing. The Congress may provide for the applicability of customary laws governing property rights or relations in determining the ownership and extent of ancestral domain. SECTION 6. The use of property bears a social function, and all economic agents shall contribute to the common good. Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene when the common good so demands. SECTION 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain. SECTION 8. Notwithstanding the provisions of Section 7 of this Article, a natural-born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of private lands, subject to limitations provided by law.

SECTION 9. The Congress may establish an independent economic and planning agency headed by the President, which shall, after consultations with the appropriate public agencies, various private sectors, and local government units, recommend to Congress, and implement continuing integrated and coordinated programs and policies for national development. Until the Congress provides otherwise, the National Economic and Development Authority shall function as the independent planning agency of the government. SECTION 10. The Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos. In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos. 4 The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in accordance with its national goals and priorities. SECTION 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall

any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines. SECTION 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures that help make them competitive. SECTION 13. The State shall pursue a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity. SECTION 14. The sustained development of a reservoir of national talents consisting of Filipino scientists, entrepreneurs, professionals, managers, high-level technical manpower and skilled workers and craftsmen in all fields shall be promoted by the State. The State shall encourage appropriate technology and regulate its transfer for the national benefit. The practice of all professions in the Philippines shall be limited to Filipino citizens, save in cases prescribed by law. SECTION 15. x x x. SECTION 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or

controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability. SECTION 17. x x x. SECTION 18. The State may, in the interest of national welfare or defense, establish and operate vital industries and, upon payment of just compensation, transfer to public ownership utilities and other private enterprises to be operated by the Government. SECTION 19. The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed. 5 SECTION 20. x x x. SECTION 21. Foreign loans may only be incurred in accordance with law and the regulation of the monetary authority. Information on foreign loans obtained or guaranteed by the Government shall be made available to the public. SECTION 22. Acts which circumvent or negate any of the provisions of this Article shall be considered inimical to the national interest and subject to criminal and civil sanctions, as may be provided by law. Article XIII Social Justice and Human Rights SECTION 1. The Congress shall give highest priority to the enactment of measures that protect and enhance the right of all the people to human dignity, reduce social, economic, and political inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the common good.

To this end, the State shall regulate the acquisition, ownership, use, and disposition of property and its increments. SECTION 2. The promotion of social justice shall include the commitment to create economic opportunities based on freedom of initiative and self-reliance. Labor SECTION 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. It shall guarantee the rights of all workers to self-organizations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law. The State shall promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial peace. The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and growth. Agrarian and Natural Resources Reform 6 SECTION 4. The Sate shall, by law, undertake an agrarian reform program founded on the right of farmers and regular farmworkers, who are landless, to own directly or collectively the lands they till or, in the case of other farmworkers, to receive a just

share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment of just compensation. In determining retention limits, the State shall respect the rights of small landowners. The State shall further provide incentives for voluntary land-sharing. SECTION 5. The State shall recognize the rights of farmers, farmworkers, and landowners, as well as cooperatives, and other independent farmers' organizations to participate in the planning, organization, and management of the program, and shall provide support to agriculture through appropriate technology and research, and adequate financial, production, marketing, and other support services. SECTION 6. The State shall apply the principles of agrarian reform or stewardship, whenever applicable in accordance with law, in the disposition or utilization of other natural resources, including lands of the public domain under lease or concession suitable to agriculture, subject to prior rights, homestead rights of small settlers, and the rights of indigenous communities to their ancestral lands. The State may resettle landless farmers and farmworkers in its own agricultural estates which shall be distributed to them in the manner provided by law. SECTION 7. The State shall protect the rights of subsistence fishermen, especially of local communities, to the preferential use of local marine and fishing resources, both inland and offshore. It shall provide support to such fishermen through

appropriate technology and research, adequate financial, production, and marketing assistance, and other services. The State shall also protect, develop, and conserve such resources. The protection shall extend to offshore fishing grounds of subsistence fishermen against foreign intrusion. Fishworkers shall receive a just share from their labor in the utilization of marine and fishing resources. SECTION 8. The State shall provide incentives to landowners to invest the proceeds of the agrarian reform program to promote industrialization, employment creation, and privatization of public sector enterprises. Financial instruments used as payment for their lands shall be honored as equity in enterprises of their choice. Health SECTION 12. The State shall establish and maintain an effective food and drug regulatory system and undertake appropriate health manpower development and research, responsive to the country's health needs and problems. Article XIV Education, Science and Technology, Arts, Culture, and Sports 7 Education SECTION 4. (2) Educational institutions, other than those established by religious groups and mission boards, shall be owned solely by citizens of the Philippines or corporations or associations at least sixty per centum of the capital of which is owned by such citizens. The Congress may, however, require increased Filipino equity participation in all educational institutions. The control and administration of educational institutions shall be vested in citizens

of the Philippines. No educational institution shall be established exclusively for aliens and no group of aliens shall comprise more than one-third of the enrollment in any school. The provisions of this subsection shall not apply to schools established for foreign diplomatic personnel and their dependents and, unless otherwise provided by law, for other foreign temporary residents. Science and Technology SECTION 11. The Congress may provide for incentives, including tax deductions, to encourage private participation in programs of basic and applied scientific research. Scholarships, grants-in-aid, or other forms of incentives shall be provided to deserving science students, researchers, scientists, inventors, technologists, and specially gifted citizens. SECTION 12. The State shall regulate the transfer and promote the adaptation of technology from all sources for the national benefit. It shall encourage the widest participation of organizations in private groups, local governments, and community-based

the generation and utilization of science and technology. SECTION 13. The State shall protect and secure the exclusive rights of scientists, inventors, artists, and other gifted citizens to their intellectual property and creations, particularly when beneficial to the people, for such period as may be provided by law. Arts and Culture SECTION 16. All the country's artistic and historic wealth constitutes the cultural treasure of the nation and shall be under the protection of the State which may regulate its disposition. Article XVI

General Provisions SECTION 11. (1) The ownership and management of mass media shall be limited to citizens of the Philippines, or to corporations, cooperatives or associations, whollyowned and managed by such citizens. 8 The Congress shall regulate or prohibit monopolies in commercial mass media when the public interest so requires. No combinations in restraint of trade or unfair competition therein shall be allowed. (2) The advertising industry is impressed with public interest, and shall be regulated by law for the protection of consumers and the promotion of the general welfare. Only Filipino citizens or corporations or associations at least seventy per centum of the capital of which is owned by such citizens shall be allowed to engage in the advertising industry. The participation of foreign investors in the governing body of entities in such industry shall be limited to their proportionate share in the capital thereof, and all the executive and managing officers of such entities must be citizens of the Philippines. 1 ANNEX B The ASEAN Competition Law Project: The Philippines Report FOURTH REGULAR FOREIGN INVESTMENT NEGATIVE LIST Effective October 24, 2000 Issued Pursuant to Section 8, Republic Act No. 7042, as amended List A: Foreign Ownership Is Limited By Mandate of the Constitution and Specific Laws

No Foreign Equity 1. Mass media except recording (Art. XVI, Sec. 11 of the Constitution; Presidential Memorandum dated 04 May 1994) 2. Practice of all professions1 a. Engineering i. Aeronautical engineering ii. Agricultural engineering iii. Chemical engineering iv. Civil engineering v. Electrical engineering vi. Electronics and communication engineering vii. Geodetic engineering viii. Mechanical engineering ix. Metallurgical engineering x. Mining engineering xi. Naval architecture and marine engineering xii. Sanitary engineering b. Medicine and allied professions i. Medicine ii. Medical technology iii. Dentistry iv. Midwifery v. Nursing

1 This is limited to Filipino citizens save in cases prescribed by law. 2

vi. Nutrition and dietetics vii. Optometry viii. Pharmacy ix. Physical and occupational therapy x. Radiologic and x-ray technology xi. Veterinary medicine c. Accountancy d. Architecture e. Criminology f. Chemistry g. Customs brokerage h. Environmental planning i. Forestry j. Geology k. Interior design l. Landscape architecture m. Law n. Librarianship o. Marine deck officers p. Marine engine officers q. Master plumbing r. Sugar technology s. Social work t. Teaching (Art. XII, Sec. 14 of the Constitution; Sec. 1 of Republic Act No. 5181) 3. Retail trade enterprises with paid-up capital of less than US$2,500,000 (Sec. 5 of

RA 8762) 4. Cooperatives (Ch. III, Art. 26 of RA 6938) 5. Private security agencies (Sec. 4 of RA 5487) 6. Small-scale mining (Sec. 3 of RA 7076) 7. Utilization of marine resources in archipelagic waters, territorial sea, and exclusive economic zone (Art. XII, Sec. 2 of the Constitution) 8. Ownership, operation and management of cockpits (Sec. 5 of Presidential Decree No. 449) 9. Manufacture, repair, stockpiling and/or distribution of nuclear weapons (Art. II, Sec. 8 of the Constitution)2

2 Domestic investments are also Conventions/Treaties to which the Philippines is a signatory). 3 10. Manufacture, repair, stockpiling and/or distribution of biological, chemical and radiological weapons (Various treaties to which the Philippine is a signatory and conventions supported by the Philippines)2 11. Manufacture of firecrackers and other pyrotechnic devices (Sec. 5 of RA 7183) Up to Twenty-Five Percent (25%) Foreign Equity 12. Private recruitment, whether for local or overseas employment (Art. 27 of PD 442) 13. Contracts for the construction and repair of locally-funded public works (Sec. 1 of Commonwealth Act No. 541, Letter of Instruction No. 630) except: a. Infrastructure/development projects covered in RA 7718; and b. Projects which are foreign funded or assisted and required to undergo prohibited (Art. II, Sec. 8 of Constitution;

international competitive biddings (Sec. 2(a) of RA 7718) Up to Thirty Percent (30%) Foreign Equity) 14. Advertising (Art. XVI, Sec. 11 of the Constitution) Up to Forty Percent (40%) Foreign Equity 15. Exploration, development and utilization of natural resources (Art. XII, Sec. 2 of the Constitution)3 16. Ownership of private lands (Art. XII, Sec. 7 of the Constitution; Ch. 5, Sec. 22 of CA 141) 17. Operation and management of public utilities (Art. XII, Sec. 11 of the Constitution; Sec. 16 of CA 146) 18. Ownership/establishment and administration of educational institutions (Art. XIV, Sec. 4 of the Constitution) 19. Culture, production, milling, processing, trading excepting retailing, of rice and corn and acquiring, by barter, purchase or byproducts thereof4 (Sec. 5 of PD 194; Sec. 15 of RA 8762) otherwise, rice and corn and the

3 Full foreign participation is allowed through financial or technical assistance agreement with the President (Art. XII, Sec. 2 of the Constitution). 4 20. Contracts for the supply of materials, goods and commodities to governmentowned or controlled corporation, company, agency or municipal corporation (Sec. 1 of RA 5183) 21. Contracts for the construction of defense-related structures (Sec. 1 of CA 541) 22. Project Proponent and Facility Operator of a BOT Project requiring a public utilities franchise (Art. XII, Sec. 11 of the Constitution; Sec. 2(a) of RA 7718)

23. Operation of deep sea commercial fishing vessels (Sec. 27 of RA 8550) 24. Adjustment companies (Sec. 323 of PD 612 as amended by PD 1814) 25. Ownership of condominiums units where the common areas in the condominium project are co-owned by the owners of the separate units or owned by a corporation (Sec. 5 of RA 4726) Up to Sixty Percent (60%) Foreign Equity 26. Financing companies regulated by the Securities and Exchange Commission (SEC) Sec. 6 of RA 5980 as amended by RA 8556)5

27. Investment houses regulated by the SEC (Sec. 5 of PD 129 as amended by RA 8366)5 28. Retail trade enterprises with a minimum paid-up capital of US$2,500,000 but less than US$7,500,000 (Sec. 5 of RA 8762)6

4 Full foreign participation is allowed provided that within the 30-year period from start of operation, the foreign investor shall divest a minimum of 60 percent of their equity to Filipino citizens (Sec. 5 of PD 194, NFA Council Resolution No. 193 s. 1998). 5 No foreign national may be allowed to own stock in financing companies or investment houses unless the country of which he is a national accords the same reciprocal rights to Filipinos (Sec. 6 of RA 5980 as amended by RA 8556; PD 129 as amended by RA 8366). 6

Full foreign participation shall be allowed after 25 March 2002 but in no case shall investments for establishing a store be less than US$830,000. Full foreign participation is currently allowed in the following categories: C) Enterprises with a paid-up capital of US$7,500,000 or more, provided that investments for establishing a store should not be less than US$830,000, and D) Enterprises specializing in high-end or luxury products, provided that the paid-up capital per store is not less than US$250,000 (Sec. 5 of RA 8762). 5 LIST B: FOREIGN OWNERSHIP IS LIMITED FOR REASONS OF SECURITY, DEFENSE, RISK TO HEALTH AND MORALS, AND PROTECTION OF SMALLANDMEDIUM-SCALE ENTERPRISES Up to Forty Percent (40%) Foreign Equity 1. Manufacture, repair, storage, and/or distribution of products and/or ingredients requiring Philippine National Police (PNP) clearance: a. Firearms (handguns to shotguns), parts of firearms and ammunition therefor, instruments or implements used or intended to be used in the manufacture of firearms b. Gunpowder c. Dynamite d. Blasting supplies e. Ingredients used in making explosives: i. Chlorates of potassium and sodium ii. Nitrates of ammonium, potassium, sodium barium, copper (ll), lead (ll), calcium and cuprite

iii. Nitric acid iv. Nitrocellulose v. Perchlorates of ammonium, potassium and sodium vi. Dinitrocellulose vii. Glycerol viii. Amorphous phosphorus ix. Hydrogen peroxide x. Strontium nitrate powder xi. Toluene f. Telescopic sights, sniper scope and other similar devices (RA 7042) as amended by RA 8179) 2. Manufacture, repair, storage and/or distribution of products requiring Department o National Defense (DND) clearance: a. Guns and ammunition for warfare b. Military ordinance and parts thereof (e.g., torpedoes, mines, depth charges, bombs, grenades, missiles) c. Gunnery, bombing and fire control systems and components d. Guided missiles/missile systems and components e. Tactical aircraft (fixed and rotary-winged), parts and components thereof f. Space vehicles and component systems 6 g. Combat vessels (air, land and naval) and auxiliaries h. Weapons repair and maintenance equipment i. Military communications equipment j. Night vision equipment k. Stimulated coherent radiation devices, components and accessories l. Armament training devices

m. Others as may be determined by the Secretary of the Department of National Defense (RA 7042 as amended by RA 8179)

3. Manufacture and distribution of dangerous drugs (RA 7042 as amended by RA 8179) 4. Sauna and steam bathhouses, massage clinics and other like activities regulated by law because of risks they impose to public health and morals (RA 7042 as amended by RA 8179) 5. All forms of gambling, e.g. race track operation (RA 7042 as amended by RA 8179) 6. Domestic market enterprises with paid-in equity capital of less than the equivalent of US$200,000 (RA 7042 as amended by RA 8179) 7. Domestic market enterprises which involve advanced technology or employ at least fifty (50) direct employees with paid-in-equity capital of less than the equivalent of US$100,000 (RA 7042 as amended by RA 8179) - o -1 REFERENCES Books The Antitrust Laws: A Primer by John H. Shenefield and Irwin M. Stelzer, The AEI Press, 3 rd ed., 1998. An Economic History of the Philippines by O. D. Corpuz, University of the Philippines Press, 1997. History of the Filipino People by Teodoro A. Agoncillo, Garotech Publishing, 8

th ed., 1990. A Living Constitution: The Cory Aquino Presidency by Joaquin G. Bernas, S.J., Anvil Publishing, Inc., 2000. Philippine Legislature: 100 Years edited by Oscar P. Pobre, Philippine Historical Association, 2000. The Philippines in the Emerging World Environment edited by Cayetano W. Paderanga, Jr., University of the Philippines Center for Integrative and Development Studies, 1996. The Revised Penal Code by Ramon C. Aquino, Central Book Supply, Inc., 1961. The Third Philippine Republic, 1946-1972 by Lewis E. Gleeck, Jr., New Day Publishers, 1993. Articles The Politics of Economic Liberalization by Paul D. Hutchcroft, Public Policy, OctoberDecember 1997, Vol 1, No. 1, pp.121-133. Discussion Papers and Studies Barriers to Entry Study, April 1992, Final Report, Vols. I and II, prepared by SGV Consulting for the U.S. Agency for International Development. Recommendations for Philippine Anti-Trust Policy and Regulation by Anthony R.A. Abad, Philiippine APEC Study Center Network (PASCN) Discussion Paper No. 2000-09, January 2000. Analysis of the State of Competition and Market Structure of the Banking and Insurance Sectors by Ma. Melanie R.S. Milo, PASCN Discussion Paper No. 2000-11, October 2000. The State of Competition and Market Structure of the Philippine Air Transport Industry

by Myrna S. Austria, PASCN Discussion Paper No. 2000-12, November 2000. 2 The State of Competition in the Philippine Manufacturing Industry by Rafaelita A. mercado-Aldaba, PASCN Discussion Paper No. 2000-13, December 2000. Competition Policy for the Philippine Downstream Oil Industry by Peter Lee U, PASCN Discussion Paper No. 2000-14, April 2000. Competition in Philippine Telecommunications: A Survey of Critical Issues by Ramonette B. Serafica, PASCN Discussion Paper No. 2000-15, February 2000. Constitution The Constitution of the Republic of the Philippines, adopted by the Constitutional Commission of 1986 on October 15, 1986 and ratified by a plebiscite, and took effect, on February 2, 1987. Statutes Act No. 3247, approved on December 1, 1925, entitled "An Act to Prohibit Monopolies and Combinations in Restraint of Trade." Act No. 3815, as amended, approved on December 8, 1930 and effective on January 1, 1932, otherwise known as the Revised Penal Code. Act No. 4164, approved on December 1, 1934, entitled An Act to Prevent the Excessive Increase in the Price of Certain Prime Necessities of Life on the Occasion of a Public Calamity, Penalizing the Violation Thereof, and For Other Purposes. Republic Act No. 37, approved on October 1, 1946 and effective on January 1, 1947, entitled An Act Granting Preference to Filipino Citizens in the Lease of Public Market Stalls. Republic Act No. 165, approved on June 20, 1947, otherwise known as the Patent Law. Republic Act No. 166, approved on June 20, 1947, otherwise known as the Trademark

Law. Republic Act No. 386, as amended, approved on June 18, 1949 and effective August 30, 1950, otherwise known as the Civil Code of the Philippines. Republic Act No. 1180, approved on June 19, 1954, otherwise known as the Retail Trade Nationalization Law. Republic Act No. 1956, approved on June 22, 1957, entitled An Act Amending Article One Hundred and Eighty-Six of the Revised Penal Code, Concerning Monopolies and Combinations in Restraint of Trade. 3 Republic Act No. 1292, approved on June 15, 1955, entitled An Act to Encourage Filipino Retailers and to Create the Filipino Retailers' Fund. Republic Act No. 1345, approved on June 17, 1955, entitled An Act Creating the National Marketing Corporation and Dissolving the Price Stabilization Corporation, Appropriating Funds Therefor, and For Other Purposes. Republic Act No. 3018, approved on August 2, 1960 and effective on January 1, 1961, entitled An Act Limiting the Right to Engage in the Rice and Corn Industry to Citizens of the Philippines, and For Other Purposes. Republic Act No. 5980, as amended, approved on August 4, 1969, otherwise known as the Financing Company Act. Republic Act No. 6124, approved on April 2, 1970, entitled An Act Providing for the Fixing of the Maximum Selling Price of Essential Articles or Commodities, Creating the Price Control Council, and For Other Purposes. Republic Act No. 6361, approved on July 27, 1971, entitled An Act Providing for the Fixing of the Maximum Selling Price of Essential Articles or Commodities, Creating the Price Control Council, and For Other Purposes.

Batas Pambansa Blg. 68, approved on May 1, 1980, otherwise known as the Corporation Code of the Philippines. Batas Pambansa Blg. 178, approved on February 23, 1982, otherwise known as the Revised Securities Act. Republic Act No. 6938, approved on March 10, 1990, otherwise known as the Cooperative Code of the Philippines. Republic Act No. 7042, approved on June 13, 1991, as amended by Republic Act No. 8179, approved on March 28, 1996, otherwise known as the Foreign Investments Act of 1991. Republic Act No. 7394, approved on April 13, 1992, otherwise known as the Consumer Act of the Philippines. Republic Act No. 7581, approved on May 27, 1992, otherwise known as the Price Act. Republic Act No. 7652, approved on June 4, 1993, otherwise known as the Investors Lease Act. Republic Act No. 7721, approved on May 18, 1994, entitled An Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines and For Other Purposes. 4 Republic Act No. 7925, approved on March 1, 1995, otherwise known as the Public Telecommunications Policy Act of the Philippines. Republic Act No. 8180, approved on March 28, 1996, otherwise known as the Downstream Oil Industry Deregulation Act of 1996. Republic Act No. 8182, approved on June 11, 1996, otherwise known as the Official Development Assistance Act of 1996. Republic Act No. 8293, approved on June 6, 1997, otherwise known as the Intellectual Property Code of the Philippines.

Republic Act No. 8479, approved on February 10, 1998, otherwise known as the Downstream Oil Industry Deregulation Act of 1998. Republic Act No. 8555, approved on February 26, 1998, entitled An Act Amending Republic Act No. 8182, and For Other Purposes. Republic Act No. 8556, approved on February 26, 1998, otherwise known as the Financing Company Act of 1998. Republic Act No. 8762, approved on March 7, 2000, otherwise known as the Retail Trade Liberalization Act of 2000. Republic Act No. 8791, approved on May 23, 2000, otherwise known as the General Banking Law of 2000. Republic Act No. 8799, approved July 19, 2000, otherwise known as the Securities Regulation Code. Republic Act No. 8800, approved July 19, 2000, otherwise known as the Safeguard Measures Act. Presidential Decrees Presidential Decree No. 49, issued on November 14, 1972, otherwise known as the Decree on Intellectual Property or the Copyright Law. Presidential Decree No. 285, issued on September 3, 1973, entitled Authorizing the Compulsory Licensing or Reprinting of Educational, Scientific or Cultural Books and Materials as a Temporary or Emergency Measure Whenever the Prices Thereof Become so Exorbitant as to be Detrimental to the National Interest. Presidential Decree No. 471, issued May 24, 1974, entitled Fixing A Maximum Period For The Duration Of Leases Or Private Lands To Aliens. Presidential Decree No. 714, issued on May 28, 1975, entitled Fixing a Maximum Period for the Duration of Leases of Private Lands to Aliens. 5

Presidential Decree No. 1674, issued on February 16, 1980, entitled Providing a Mechanism for Price Regulation, Creating a Price Stabilization Council, Prescribing Its Powers and Responsibilities and For Other Purposes. Letters of Instructions Letter of Instruction No. 1305, issued on March 29, 1983, entitled "Directing Measures to Prevent Cement Hoarding, Price Manipulation and Profiteering." Letter on Instruction No. 1342, on Measures July 7, 1983, entitled "Ordering Immed iate

to Prevent Price Manipulation and to Protect Consumers. Letter of Instruction No. 1359, issued on October 12, 1983, entitled Directing Measures to Prevent Hoarding, Profiteering and Price Manipulation. Executive Order Executive Order No. 286, dated August 24, 2000, entitled Promulgating the Fourth Regular Foreign Investment Negative List. Supreme Court Decisions King, et al. vs. Hernaez, et al., G.R. No. L-14859, March 31, 1962. Filipinas Compaia de Seguros, et al., vs. Hon. Francisco Y. Mandanas, et al., G.R. No. L-19638. June 20, 1966. John Gokongwei, Jr. vs. Securities and Exchange Commission, et al., G.R. No. L45911, April 11, 1979. Philippine Ports Authority vs. Hon. Rafael L. Mendoza, et al., G.R. No. L-48304, September 11, 1985. Francisco S. Tatad, vs. The Secretary of the Department of Energy and the Secretary of the Department of Finance, G.R. No. 124360, Lagman, November 5, 1997, and Edcel C.

et al. vs. Hon. Ruben Torres, et al., G.R. No. 127867, November 5, 1997. Congressman Enrique T. Garcia vs. Hon. Renato C. Corona, et al., G.R. No. 132451, December 17, 1999. Opinions of the Secretary of Justice Department of Justice Opinion No. 19, series of 1962, February 26, 1962. Department of Justice Opinion No. 160, series of 1983, October 17, 1983. 6 Others United Nations Conference on Trade and Development Model Law on Competition, UNCTAD Series on Issues in Competition Law and Policy, together with draft commentaries to possible elements for articles of a model law or laws, United Nations, Geneva, 2000. Glossary of Industrial Organisation Economics & Competition Law, Organisation for Economic Co-operation and Development. -o

Since President Aquino mentioned a new antitrust law in his first State of the Nation Address, much work has been done on the antitrust bills filed in Congress. Legislative hearings have been concluded and proponents say that after decades of waiting (since the Eighth Congress, Im told), we will finally have a unified, up -to-date and comprehensive antitrust or competition law. What are antitrust laws? Antitrust or competition laws are laws that regulate and maintain market competition by prohibiting or regulating anti-competitive behavior. Three acts that antitrust laws normally seek to prohibit are monopolies, cartel-like behavior and abuse of dominant market position. In an economic sense, antitrust laws are in place to promote a freer market and more open trade, which will result in substantial efficiency and welfare gains for everyone. A hot topic The proposed acquisition of Digitel by PLDT has sparked even more interest on an antitrust law for the country. Globe, a competitor, argues that the transaction will lead to PLDT controlling close to 70 percent of the market and will eventually lead to higher prices and rates. However, PLDT and Digitel maintain that the deal will result in continued unli benefits, to use telco lingo, for consumers. Aside from the PLDT-Digitel deal, Nestl has its own antitrust controversy: Allegedly, it has been engaging in predatory pricing to drive out competition from the market. Expectedly, Nestl contends that its products are not the cheapest in the market and that competition among lower-priced products remains intense.

Justice Secretary Leila de Lima also had reportedly ordered a review of antitrust cases filed against Fraport AG (Fraport), a German company, and its local partner Philippine International Air Terminals Co. (Piatco), in connection with the Ninoy Aquino International Airport Terminal 3. Interestingly, perhaps in an attempt to respond to these antitrust controversies, the President issued Executive Order No. 45, which created an Office of the Competition Authority in the Department of Justice, to help enforce our antitrust laws. Current law This is not to say that our country has no antitrust laws at all. From myriad sources of law, one can find snippets of an anti-competition framework that serves as some sort of precedent for the current bill. Foremost is Article XII, Section 19, of the Constitution, which mandates the State to regulate or prohibit monopolies when required by public interest and at all times to prohibit combinations in restraint of trade and other unfair competition practices. There are implementing pieces of legislation, like the Revised Penal Code which, in Article 186, punishes monopolies and combinations in restraint of trade. Meanwhile, the Civil Code under Article 28 authorizes the collection of damages arising from unfair competition in agricultural, industrial or commercial enterprises or in labor. There are other laws that attempt to penalize anti-competition activities. However, with very few exceptions, many of these laws have but skeletal provisions and do not provide meaningful guidance to the market on how our competition policy should be implemented. Salient features What is clear from the bills (at least after the Senate and House committee hearings) is that they do not prohibit monopolies per se, perhaps taking their cue from the Constitution and our Asean neighbors. At the core of the bills are more detailed provisions on anti-competitive agreements (like price-fixing, market allocation), abuse of dominant position (like predatory pricing), anti-competitive mergers and more detailed enforcement mechanism. Unlike its Senate counterpart, the House version proposes to create a five-man Philippine Competition Commission as a single venue for anti-competition issues. Similarly, the House version proposes to adopt non-adversarial methods of enforcement, like a request for binding ruling to make the law more business-friendly. Anti-antitrust law There are, of course, those who are against an antitrust law. Some economists argue that the need for an antitrust law stems from the wrongful notion that an unhindered and unregulated market leads to coercive monopolies. They assert that no unfair monopoly can ever be created by means of free trade in a free market economy. Surely, there are policy issues yet to be decided in the plenary sessions of both Houses before an antitrust law becomes part of our statute books. A basic policy issue, of course, is whether we really need a new antitrust law. If so, do we adopt the American system or the European model? What acts should be outlawed and what type of enforcement mechanism should be adopted considering the stage of our economic development? Should the law go for a separate competition commission or just create an office in the DoJ? How should the competition authority interface with other government agencies, like the Department of Energy, Department of Trade and the Securities and Exchange Commission on antitrust-related matters that, by law, are currently under their jurisdiction?

The big question is, whether a new antitrust law will finally see the light of day or will the bills suffer the same fate as the preceding measures? Your guess is as good as mine. Anti-trust law needed to curb emerging monopolies paper October 7, 2010 Congress was urged yesterday to enact new legislation that will police monopolistic practices that stifle free competition and hurt consumers in the face of the wave of mergers and consolidations now sweeping the country and across the globe. Forensic Law and Policy Strategies Inc. (Forensic Solutions), which is headed by former Justice Secretary Alberto Agra, said in its latest policy paper that an anti-trust law is necessary to ensure unfettered competition in Philippine industries and position Filipino consumers as the supreme arbiter in a free market that yields the highest quality of good and services at the lowest prices possible. In its 10th policy paper, Forensic Solutions cited the urgency for new anti-trust legislation at a time when the current trend is toward the privatization and deregulation of vital industries, with governments getting off the back of business and ceding state control over economic activities. Mergers and acquisitions, which are tools for expansion and restructuring, have resulted in even greater market power being concentrated in fewer corporations, said Forensic Solutions in the policy paper titled Competition Laws in the Face of the Merger Wave. This environment is fertile ground for restrictive business practices that prevent true and fair competition. The absence of legislation particularly addressing the effects of mergers and consolidations on market competition leaves the Philippines ill-equipped to police abuses and anti-competitive practices, the paper said. It noted that subsidiaries of multinationals that may behave competitively in industrialized countries where strong anti-trust regulations are in place might be more inclined to indulge in anti-competitive practices in developing countries where there are few such regulations. In the Philippine setting, such corporate consolidations include the 2006 takeover by Banco de Oro of Equitable PCI Bank, which is the largest bank merger in local history; the preceding takeover by Equitable Bank of the larger PCI Bank in 1999; the takeover by the Bank of the Philippine Islands of the Far East Bank and Trust Co. and DBS Bank Philippines in 2000. Another big merger was that of Philip Morris International and Fortune Tobacco Co. and the absorption by Aboitiz Transport Systems Corp. of its subsidiary the logistics firm Zoom in Packages. Following the global merger of Merck & Co. Inc. and Schering-Plough Corp., their local counterparts MSD and Schering Plough (Philippines) also began the process of integrating their respective businesses in the country, Agra and Raola said. Other notable domestic mergers were those of Aboitiz, William Lines, and Gothong Lines, all shipping companies, into WG&A Super Ferry; the acquisition by PLST of the local Internet service provider Sequel Net; and the Lopez conglomerate consisting of ABS-CBN, Bayantel, Meralco, Sky Cable and Sun Cable, Manila Water Co. and the newspaper Manila Chronicle.

The policy paper noted that mergers and corporate consolidations in rich countries have a significant effect on developing economies like the Philippines, where the local subsidiaries of foreign corporate giants could engage in similar moves, leaving local consumers unprotected from such anti-competition practices. It noted for instance the possible cartelization of the pharmaceuticals sector on account of the mergers of US drugs manufacturers. A 1999 study by Ajit Singh and Rahul Dhumale of the University of Cambridge highlighted, they said, the importance of a competition policy in developing countries in the face of the global merger wave. This University of Cambridge study shows that the large incidence of cross-border takeovers and mergers has a competition-reducing effect, which developing countries will find difficult to stop, said Agra and Raola. They noted that in response to these developments in the corporate world, two bills have been filed by Senate President Juan Ponce Enrile and Sen. Miriam Defensor Santiago that aim to penalize questionable mergers. Enriles Senate Bill 123 penalizes combinations or conspiracies in restraint of trade and all forms of artificial machinations that will injure, destroy or prevent free market competition. The Enrile bill also prohibits stock or asset acquisitions, grant of proxies or voting rights, and board membership in two or more corporations that have the effect of substantially reducing competition or tending to create a monopoly. On the other hand, Santiagos Senate Bill 1835 amends certain provisions of the Revised Penal Code against monopolies by prescribing criminal penalties and fines on corporation of persons taking part in any monopoly or combinations of practices in restraint of trade. Agra and Raola noted, however, that Congress needs to address other equally important concerns regarding mergers and consolidations. They recommended, for one, a law calling for the review of proposed mergers and consolidations before they are approved to check against abuses. A threshold should be set to determine when and under what conditions an enterprise is said to be enjoying a dominant market position, they noted. Arrangements that do not comply with fair competition guidelines and those that significantly limit competition should not be allowed. They said the SEC should be allowed to take remedial action, and impose penalties and sanctions against existing merged corporations that are engaging in anticompetitive practices. Agra and Raola also proposed the simplification of the current legal mechanisms available to interested parties for them to obtain relief or file injunctions against questionable mergers without going through a protracted litigation process. In its paper on corporate mergers and consolidations, Forensic Solutions noted that anti-trust legislation is not new in the Philippine legal landscape as the Constitution and local jurisprudence already address such concerns. It noted that the Supreme Court has already issued several rulings on mergers, including the landmark Gokongwei vs SEC case, in which the high tribunal stated that the inclusion of John Gokongwei, who owns a substantial stake in the food company CFC-Robina, in the board of its rival San Miguel Corp., could lead to an anticompetitive situation.

The Revised Penal Code, Civil Code, Corporation Code, Anti-Monopoly Law (Republic Act 3247), Revised Securities Act, Intellectual Property Code, Price Act, Consumer Act, Downstream Oil Deregulation Act, Anti-Dumping Act, and Electric Power Industry Reform Act also contain various provisions against restraint of trade, cartels and other anti-competition practices. Daily Tribune No Anti-Trust Law in the Philippines

The business lobby in the Philippines is so powerful and the local legislature so corrupt and lazy that up to now the country does not have an anti-trust law.

In the US, the Anti Trust Division of the Department of Justice (www.doj.gov) enforces the following statutes:

Sherman Antitrust Act, 15 U.S. Wilson Tariff Act, 15 U.S. Clayton Act, 15 U.S. 12-27, 29 U.S. Appeals [U.S. is civil complainant, equitable relief sought], 15

U.S. Depositions for Use in Suits in Equity Proceedings Open to the Public 15 U.S. Antitrust Civil Process Act, 15 U.S. 1311-1314, as Amended International Antitrust Enforcement Assistant Act of 1994, 15 U.S. 6201-6212 Criminal Statutes to Protect the Integrity of the Investigations and Prosecutions of the Antitrust Division Obstruction of Justice, 18 U.S. 1501-1511

Under 1 Sherman Act, 15 U.S.C. 1, every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three

years, or by both said punishments, in the discretion of the court.

Under 2 Sherman Act, 15 U.S.C. 2, every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court. Under 3 Sherman Act, 15 U.S.C. 3, every contract, combination in form of trust or otherwise, or conspiracy, in restraint of trade or commerce in any Territory of the United States or of the District of Columbia, or in restraint of trade or commerce between any such Territory and another, or between any such Territory or Territories and any State or States or the District of Columbia, or with foreign nations, or between the District of Columbia and any State or States or foreign nations, is declared illegal. Every person who shall make any such contract or engage in any such combination or conspiracy, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court. Under 4 Sherman Act, 15 U.S.C. 4, the district courts of the United States are invested with jurisdiction to prevent and restrain violations of sections 1 to 7 of the title; and it shall be the duty of the several United States attorneys, in their respective districts, under the direction of the Attorney General, to institute proceedings in equity to prevent and restrain such violations.

Under 6 Sherman Act, 15 U.S.C. 6, any property owned under any contract or by any combination, or pursuant to any conspiracy (and being the subject thereof) mentioned in section 1 of this title, and being in the course of transportation from one State to another, or to a foreign country, shall be forfeited to the United States, and

may be seized and condemned by like proceedings as those provided by law for the forfeiture, seizure, and condemnation of property imported into the United States contrary to law.

Under WILSON TARIFF ACT, 15 U.S.C. 8-11, every combination, conspiracy, trust, agreement, or contract is declared to be contrary to public policy, illegal, and void when the same is made by or between two or more persons or corporations, either of whom, as agent or principal, is engaged in importing any article from any foreign country into the United States, and when such combination, conspiracy, trust, agreement, or contract is intended to operate in restraint of lawful trade, or free competition in lawful trade or commerce, or to increase the market price in any part of the United States of any article or articles imported or intended to be imported into the United States, or of any manufacture into which such imported article enters or is intended to enter. Every person who shall be engaged in the importation of goods or any commodity from any foreign country in violation of this section, or who shall combine or conspire with another to violate the same, is guilty of a misdemeanor, and on conviction thereof in any court of the United States such person shall be fined in a sum not less than $100 and not exceeding $5,000, and shall be further punished by imprisonment, in the discretion of the court, for a term not less than three months nor exceeding twelve months.

Under 2 Clayton Act, 15 U.S.C. 13, it shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of

either of them: * Provided, That nothing herein contained shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered: * Provided, however, That the Federal Trade Commission may, after due investigation and hearing to all interested parties, fix and establish quantity limits, and revise the same as it finds necessary, as to particular commodities or classes of commodities, where it finds that available purchasers in greater quantities are so few as to render differentials on account thereof unjustly discriminatory or promotive of monopoly in any line of commerce; and the foregoing shall then not be construed to permit differentials based on differences in quantities greater than those so fixed and established: * And provided further, That nothing herein contained shall prevent persons engaged in selling goods, wares, or merchandise in commerce from selecting their own customers in bona fide transactions and not in restraint of trade: * And provided further, That nothing herein contained shall prevent price changes from time to time where in response to changing conditions affecting the market for or the marketability of the goods concerned, such as but not limited to actual or imminent deterioration of perishable goods, obsolescence of seasonal goods, distress sales under court process, or sales in good faith in discontinuance of business in the goods concerned. Further, under the said provision, upon proof being made, at any hearing on a complaint under this section, that there has been discrimination in price or services or facilities furnished, the burden of rebutting the prima-facie case thus made by showing justification shall be upon the person charged with a violation of this section, and unless justification shall be affirmatively shown, the Commission is authorized to issue an order terminating the discrimination: Provided, however, That nothing herein contained shall prevent a seller rebutting the prima-facie case thus made by showing that his lower price or the furnishing of services or facilities to any purchaser or purchasers was made in good faith to meet an equally low price of

a competitor, or the services or facilities furnished by a competitor. Furthermore, it shall be unlawful for any person engaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, except for services rendered in connection with the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction or to an agent, representative, or other intermediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect control, of any party to such transaction other than the person by whom such compensation is so granted or paid. Other acts punished under the above-cited provisons are as follows:

Payment for services or facilities for processing or sale

It shall be unlawful for any person engaged in commerce to pay or contract for the payment of anything of value to or for the benefit of a customer of such person in the course of such commerce as compensation or in consideration for any services or facilities furnished by or through such customer in connection with the processing, handling, sale, or offering for sale of any products or commodities manufactured, sold, or offered for sale by such person, unless such payment or consideration is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities.

Furnishing services or facilities for processing, handling, etc.

It shall be unlawful for any person to discriminate in favor of one purchaser against another purchaser or purchasers of a commodity bought for resale, with or without processing, by contracting to furnish or furnishing, or by contributing to the furnishing of, any services or facilities connected with the processing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all purchasers on proportionally equal terms.

Knowingly inducing or receiving discriminatory price

It shall be unlawful for any person engaged in commerce, in the course of such commerce, knowingly to induce or receive a

discrimination in price which is prohibited by this section. Under 15 U.S.C. 13a, it shall be unlawful for any person engaged in commerce, in the course of such commerce, to be a party to, or assist in, any transaction of sale, or contract to sell, which discriminates to his knowledge against competitors of the purchaser, in that, any discount, rebate, allowance, or advertising service charge is granted to the purchaser over and above any discount, rebate, allowance, or advertising service charge available at the time of such transaction to said competitors in respect of a sale of goods of like grade, quality, and quantity; to sell, or contract to sell, goods in any part of the United States at prices lower than those exacted by said person elsewhere in the United States for the purpose of destroying competition, or eliminating a competitor in such part of the United States; or, to sell, or contract to sell, goods at unreasonably low prices for the purpose of destroying competition or eliminating a competitor. Any person violating any of the provisions of this section shall, upon conviction thereof, be fined not more than $5,000 or imprisoned not more than one year, or both. Under 15 U.S.C. 13b, nothing in sections 13 to 13b and 21a of this title shall prevent a cooperative association from returning to its members, producers, or consumers the whole, or any part of, the net earnings or surplus resulting from its trading operations, in proportion to their purchases or sales from, to, or through the association. Under 15 U.S.C. 13c, nothing in sections 13 to 13b and 21a of this title, shall apply to purchases of their supplies for their own use by schools, colleges, universities, public libraries, churches, hospitals, and charitable institutions not operated for profit. Under 3 Clayton Act, 15 U.S.C. 14, it shall be unlawful for any person engaged in commerce, in the course of such commerce, to lease or make a sale or contract for sale of goods, wares, merchandise, machinery, supplies, or other commodities, whether patented or unpatented, for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, or fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or

deal in the goods, wares, merchandise, machinery, supplies, or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce. Under 4D Clayton Act, 15 U.S.C. 15d, the measurement of damages is as follows: In any action under section 15c(a) (1) of this title, in which there has been a determination that a defendant agreed to fix prices in violation of sections 1 to 7 of this title, damages may be proved and assessed in the aggregate by statistical or sampling methods, by the computation of illegal overcharges, or by such other reasonable system of estimating aggregate damages as the court in its discretion may permit without the necessity of separately proving the individual claim of, or amount of damage to, persons on whose behalf the suit was brought. Under 6 Clayton Act, 15 U.S.C. 17, antitrust laws are not applicable to labor organizations: The labor of a human being is not a commodity or article of commerce. Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, or horticultural organizations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade, under the antitrust laws. Regarding acquisition of shares, 7 Clayton Act, 15 U.S.C. 18 provides: No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly. No person shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to

the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of one or more persons engaged in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition, of such stocks or assets, or of the use of such stock by the voting or granting of proxies or otherwise, may be substantially to lessen competition, or to tend to create a monopoly. 7A Clayton Act, 15 U.S.C. 18a provides that except as exempted pursuant to subsection (c), no person shall acquire, directly or indirectly, any voting securities or assets of any other person, unless both persons (or in the case of a tender offer, the acquiring person) file notification pursuant to rules under subsection (d)(1) and the waiting period described in subsection (b)(1) has expired, if the acquiring person, or the person whose voting securities or assets are being acquired, is engaged in commerce or in any activity affecting commerce; and as a result of such acquisition, the acquiring person would hold an aggregate total amount of the voting securities and assets of the acquired person in excess of $200,000,000 (as adjusted and published for each fiscal year beginning after September 30, 2004, in the same manner as provided in section 8(a)(5) to reflect the percentage change in the gross national product for such fiscal year compared to the gross national product for the year ending September 30, 2003); or in excess of $50,000,000 (as so adjusted and published) but not in excess of $200,000,000 (as so adjusted and published); and any voting securities or assets of a person engaged in manufacturing which has annual net sales or total assets of $10,000,000 (as so adjusted and published) or more are being acquired by any person which has total assets or annual net sales of $100,000,000 (as so adjusted and published) or more; any voting securities or assets of a person not engaged in manufacturing which has total assets of $10,000,000 (as so adjusted and published) or more are being acquired by any person which has total assets or annual net sales of $100,000,000 (as so adjusted and published) or more; or any voting securities or assets of a person with annual net sales or total assets of $100,000,000 (as so adjusted and published) or more are being acquired by any person with total assets or annual net sales of $10,000,000 (as so adjusted and published) or more. In the case of a tender offer, the person whose voting securities are sought to be acquired by a person required to file notification under this subsection shall file notification pursuant to

rules under subsection (d). The following classes of transactions requirements of this section

are

exempt

from

the

acquisitions of goods or realty transferred in the ordinary course of business; acquisitions of bonds, mortgages, deeds of trust, or other obligations which are not voting securities; acquisitions of voting securities of an issuer at least 50 per centum of the voting securities of which are owned by the acquiring person prior to such acquisition; transfers to or from a Federal agency or a State or political subdivision thereof; transactions specifically exempted from the antitrust laws by Federal statute; transactions specifically exempted from the antitrust laws by Federal statute if approved by a Federal agency, if copies of all information and documentary material filed with such agency are contemporaneously filed with the Federal Trade Commission and the Assistant Attorney General; transactions which require agency approval under section 1467a(e) of Title 12, section 1828(c) of Title 12, or section 1842 of Title 12; transactions which require agency approval under section 1843 of Title 12 or section 1464 of Title 12, if copies of all information and documentary material filed with any such agency are contemporaneously filed with the Federal Trade Commission and the Assistant Attorney General at least 30 days prior to consummation of the proposed transaction; acquisitions, solely for the purpose of investment, of voting securities, if, as a result of such acquisition, the securities acquired or held do not exceed 10 per centum of the outstanding voting securities of the issuer; acquisitions of voting securities, if, as a result of such acquisition, the voting securities acquired do not increase, directly or indirectly, the acquiring person's per centum share of outstanding voting securities of the issuer; acquisitions, solely for the purpose of investment, by any bank, banking association, trust company, investment company, or insurance company, of (A) voting securities pursuant to a plan of reorganization or dissolution; or (B) assets in the ordinary course of its business; and such other acquisitions, transfers, or transactions, as may be exempted under subsection (d) (2) (B) of this section.

Any person, or any officer, director, or partner thereof, who fails to comply with any provision of the above section shall be liable to the United States for a civil penalty of not more than $10,000 for each day during which such person is in violation of this section. Such penalty may be recovered in a civil action brought by the United States. Under 8 Clayton Act, 15 U.S.C. 19, the following rules on interlocking directorates and officers have been set: No person shall, at the same time, serve as a director or officer in any two corporations (other than banks, banking associations, and trust companies) that are engaged in whole or in part in commerce; and by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the antitrust laws; if each of the corporations has capital, surplus, and undivided profits aggregating more than $10,000,000 as adjusted pursuant to paragraph (5) of this subsection.

Notwithstanding the provisions of paragraph (1), simultaneous service as a director or officer in any two corporations shall not be prohibited by this section if the competitive sales of either corporation are less than $1,000,000, as adjusted pursuant to paragraph (5) of this subsection; the competitive sales of either corporation are less than 2 per centum of that corporation's total sales; or the competitive sales of each corporation are less than 4 per centum of that corporation's total sales.

"Competitive sales" means the gross revenues for all products and services sold by one corporation in competition with the other, determined on the basis of annual gross revenues for such products and services in that corporation's last completed fiscal year. For the purposes of this paragraph, "total sales" means the gross revenues for all products and services sold by one corporation over that corporation's last completed fiscal year. Under 14 Clayton Act, 15 U.S.C. 24, whenever a corporation shall violate any of the penal provisions of the antitrust laws, such

violation shall be deemed to be also that of the individual directors, officers, or agents of such corporation who shall have authorized, ordered, or done any of the acts constituting in whole or in part such violation, and such violation shall be deemed a misdemeanor, and upon conviction therefor of any such director, officer, or agent he shall be punished by a fine of not exceeding $5,000 or by imprisonment for not exceeding one year, or by both, in the discretion of the court. In addition to the US DOJs criminal enforcement activities under the Sherman Act, there are a number of criminal statutes where the conduct in question mandates additional --or related --criminal enforcement which include other offenses that arise from similar conduct accompanying the Sherman Act violation, including: conspiracy to defraud the government (18 U.S.C. 371); false statements made to government entities and officials (18 U.S.C. 1001); major fraud against the United States (18 U.S.C. 1031); mail fraud (18 U.S.C. 1341); wire fraud (18 U.S.C. 1343); RICO (18 U.S.C. 1961 et seq.) tax offenses (26 U.S.C. 7201) obstruction of justice (18 U.S.C. 1503); obstruction of proceedings before departments, agencies, and committees (18 U.S.C. 1505), which is used when there is obstruction of proceedings under the Antitrust Civil Process Act; obstruction of criminal investigations (18 U.S.C. 1510); witness tampering (18 U.S.C. 1512); perjury and false declarations (18 U.S.C. 1621-1623); and criminal contempt (18 U.S.C. 401, 402, 3691; Fed. R. Crim. P. 42). the witness immunity provisions enacted under the Organized Crime Control Act of 1970 (18 U.S.C. 6001 et seq.);

Several official sets of guidelines have been issued by the US DOJ Antitrust Division: The Horizonal Merger Guidelines, issued jointly by the Division and the Federal Trade Commission ("FTC") on April 2, 1992, largely replace the guidelines that were issued on June 14, 1984.(15)The Horizonal Merger Guidelines are designed to outline the Division's standards for determining whether to oppose mergers or acquisitions with a horizonal overlap under Section 7 of the Clayton

Act. On April 8, 1997, the Division and FTC issued a revision to the Guidelines involving the treatment of efficiencies.

The Antitrust Guidelines for the Licensing of Intellectual Property ("IP Guidelines") were jointly issued by the Division and FTC on April 6, 1995. The IP Guidelines state the two agencies' enforcement policy with respect to the licensing of intellectual property protected by patent, copyright, and trade secret law.

The Antitrust Enforcement Guidelines for International Operations ("International Guidelines") were jointly issued by the Division and FTC in April, 1995, and replaced the international guidelines issued by the Department in 1988. The International Guidelines provide antitrust guidance to businesses engaged in international operations on questions that relate to the two agencies' international enforcement policy. The International Guidelines address such topics as subject matter jurisdiction over conduct and entities outside the United States, comity, mutual assistance in international antitrust enforcement, and the effects of foreign governmental involvement on the antitrust liability of private entities.

The Statements of Antitrust Enforcement Policy and Analytical Principles Relating to Health Care and Antitrust ("Health Care Policy Statements") were jointly issued by the Division and FTC on August 28, 1996. They revise policy statements jointly issued by the agencies on September 27, 1994, which were themselves a revision and expansion of joint policy statements issued on September 15, 1993.

The Health Care Policy Statements consist of nine statements that describe antitrust enforcement policy with respect to various issues in the health care industry. Most of the statements include guidance in the form of antitrust safety zones, which describe conduct that the agencies will not challenge under the antitrust laws, absent extraordinary circumstances.

Atty. Manuel Laserna Jr. Las Pinas City, Philippines

DTI, industries back anti-competition bill By BERNIE CAHILES-MAGKILAT

June 27, 2011, 1:22am MANILA, Philippines Domestic manufacturers and the Department of Trade and Industry (DTI) are one in pushing for the passage of anti-competition bill into law stressing there are many forms of anti-competition practices that need thorough study to level the playing field and encourage more investments. Trade and Industry Secretary Gregory L. Domingo and Jesus L. Arranza, chairman of the Federation of Philippine Industries, have rallied behind Senate Bill No. 1 or the Competition Act of Senator Juan Ponce Enrile. We are for it, Domingo said. Domingo said that if a Competition Commission is created, there should be a need for a concurrence of two departments the DTI, National Economic Development Authority or the Department of Justice or a combination for check and balance on decisions made on particular complaint of anti-competitive behavior. If there would be no Competition Commission, Domingo said then the DoJ would be the primary investigative body. Earlier, Malacaang issued Executive Order 45 designating the DoJ as the Competition Authority. The issuance of the EO was timely considering the opposition of the countrys second biggest telco company, Globe Telecommunications of the Ayala Group against the acquisition of Digital Telecommunic ations, the countrys third largest telco player, by Philippine Long Distance Co. (PLDT), the countrys biggest telco company. Globe has urged the government to protect and maintain free competition in the market by ensuring a level playing field that will allow consumers to choose the best services and give telco providers equal opportunities to compete. Globe believes that the merger will result in an imbalance in market share and scarce frequency resources that will affect free competition and services to millions of subscribers, among others. According to Domingo, the DTI will continue its role in business and the industry as the information source for business practices, business relationship and impact on business environment. For its part, the FPI, which is comprised of domestic industry associations, has been in the forefront in putting the interest of domestic industries and promotion of fair trade practices. There are various kinds of unfair trade practices and these should be studied by the DoJ and see if there are elements of anti-competitive behavior, said Arranza. According to Arranza, a good indicator of competition going on among industry players is when companies engage in promotions of their products and services.

But if industry players announce their price and talk as an association that is a good indication of a cartel operation going on, Arranza said. Arranza does not want to specify which industries are prone to anti-competitive tendencies. It could be recalled that Arranza personally initiated a case for cartelization before the DoJ against the officers of the LPG Marketers Association (LPGMA) headed by Arnel Ty. Arranza filed this case on the ground that LPGMA discussed among themselves the pricing of their commodity and used as evidenced the same documents, which LPGMA submitted to the Commission on Elections for its party-list registration. Arranza strongly believed that prosecuting monopolies and combinations that restraint trade would necessarily promote competition, level the playing field in the market, and ultimately inure to the benefit of the consumers. Senate Bill No. 1 or the "Competition Act of 2010" is anchored on 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." Competition Law and Policy The Philippines should be fertile ground for a national competition law and policy. The country experienced nearly a half-century of rule under the legal and political traditions of the United States. The Philippines Constitution recognizes the indispensable role of the private sector (and) encourages private enterprise. It authorizes the state to regulate or prohibit monopolies when the public interest so requires, and disallows any combinations in restraint of trade or unfair competition. Yet the Philippines has neither a comprehensive law of competition nor a specialized enforcement entity. Some Philippine laws and government entities are vested with authority to challenge trade restraints, and these laws provide remedies. There is, however, no substantive Philippine jurisprudence on competition because virtually no cases have been litigated. Litigation of cases also would be difficult because the law does not define, explain, or establish criteria for what constitutes the elements of a violation. While there are specific sectors that have made headway to open competition, there is no central government authority responsible for competition law or policy. At present, a national competition lawor an agency to enforce itis not a high priority with the current administration or with Philippine lawmakers. Consequently, political will is insufficient to push forward one of the several existing draft competition laws pending in the Philippine House and Senate. Moreover, there is no widespread public constituency for competition law, and little public understanding of its potential benefits to consumers and new business entrants. This apparent domestic complacency contrasts with the Philippines' sensitivity about its role as a regional economic and political influence. In the ASEAN trade organization, where the common goal is a single market, the Philippines is falling behind as other member states that have adopted competition laws are developing a body of law and experience.

Philippines: Competition law, policy hope to curb monopolies, cartels By Tonyo Cruz Aug 22, 2011 1:59PM UTC Last week, the Center for Media Freedom and Responsibility held a forum about the Competition Law and Policy at the Korean Case Room, Asian Institute of Management, Makati City. In its invitation, the CMFR notes: For the past few decades, the Philippines embarked on a process of market liberalization that included removal or reduction of tariff and non-tariff barriers, privatization, deregulation, and encouragement of foreign direct investment. As in other developing countries, these reforms were designed to promote economic growth and welfare. However, the potential for increased benefits from these reforms may not be realized if business and investment conduct prevents a level playing field and fair competition. Some trends have raised the need for an effective competition law and policy. Various laws (criminal and civil) and regulations in the Philippines, among them affecting specific industries contain elements of competition policy. But the implementation of these laws is hampered, among others, by the inadequate technical expertise of the implementing agencies in enforcing them. During the multisectoral portion of the forum, I gave the following remarks, which I extended for this blog post, in my capacity as president of consumer group TXTPower: I wish to thank the CMFR for spearheading this event and for inviting us to speak on this important issue gripping the citizens of what many have described as the worlds texting and social networking capital. Now, allow me to make a few key points on todays topic.

Since its founding in 2001, TXTPower takes a look at issues from three perspectives as consumers, as netizens and as citizens. And we do so again as we attempt to make sense of the Competition Authority formed by President Aquino, the competition bills filed in both houses of Congress and in the face of the reemergence of a monopoly in the telecommunications sector. Remember PLDT monopoly practices? Under a long-running monopoly until the mid1990s, Filipinos were made to endure years or decades of waiting for the installation of telephone lines, and another long waiting time for the dial tone. Long distance services, especially international calls, were so expensive and we had to line up at the nearest PLDT office and calling center. Under a monopoly, only the monopolist prospers and the rest of us experience stunted growth. There was no other way for the Philippines to improve its telecom sector then than to dismantle the PLDT monopoly. Initial changes and reforms under Republic Act 7925 propelled competition in the telecommunications sector as far as establishing a number of high-capital companies, especially in the cellular mobile telephone system (CMTS) and the wired landline systems. It would take several years for the public to benefit from RA 7925 in the form of the introduction of prepaid cellular phones, prepaid cards, prepaid IDD, the elimination of national IDD via cellular phones, the introduction of prepaid phone reloading, the introduction of unlimited call and text services. It is easy to laud the telcos for these benefits, but a closer inspection would reveal that many of these benefits accrued to consumers after they themselves for and demanded them. After telcos cashed in on the deregulation policy unleashed by RA 7925 in the form of unregulated windfall profits, the mergers and buy-outs started, and consumers again funded these corporate actions as well as a number of bad business decisions made by the corporations. Globe Telecom, would buy Islacom, the countrys first GSM provider. Today, the PLDT network has under its wings Piltel, Smart, Cure and, of late, Digitel/Sun Cellular. In the case of Smart, consumers reportedly subsidized its migration from the failed ETACS to GSM. Monopolies and any other anti-competitive business formation are bad for consumers, if only for the simple reason that they mean less number of choices in the market. If and when a monopoly emerges or reemerges, the first victim is the consumer.

To clarify, consumers are not against mergers and acquisitions as these are facts of business activity. We however raise serious questions on the legality of the transactions entered into by telcos among themselves. For even as they merge and acquire, consumers still reel from such practices as the charging of arbitrarily-set interconnection fees for calls and texts made across telcos. The problem persists up to this day, driving up the cost of calls and text. A monopoly captures the market not by providing superior products but by the capricious use of the monopolist of his immense resources and prerogatives to monopolize the market. The existence or reemergence of monopolies is even made more scandalous as we see it in the telecommunications sector. It is important to stress that telecommunications is not just a commodity or a business. It is a public utility that is imbued with public trust, makes use of publicly-owned resources and ultimately aims to become an enabler of the progressive goals of the public. This public utility nature of telecommunications is formally expressed by the telcos application for and grant of franchises by the Congress of the Philippines. Without such franchises, no company may enter into the telecommunications business. Franchises are granted, in theory, only to majority Filipino-owned companies which have the vision and the means to roll out telecommunications services. Globally, regionally and nationally, there is a continuing rejection of all sorts of business monopolies. Opposing monopolies is not bad for business. The opposite is true. Monopolies are bad for business. Monopolies tell companies, especially small ones, that they cannot aspire to be as big; the latters destiny is to swallowed whole or in part by the rampaging monopolist beast. Technologically and business-wise, the concentration of ownership of

telecommunications infrastructure and franchises under a powerful monopoly poses a number of real and perceived threats and disadvantages to the majority of citizens. From violations of the right to privacy to the wholesale purchase of patents, to exclusive contracts to acquire telecom equipment, to the use of closed systems the list seems endless and these problems are made worse when they are perpetrated by monopolists.

The President would do well to boost consumer and business confidence by including in his priority legislative measures the enactment of an anti-monopoly and anti-trust law, or a competition law. The absence of such a law has been misinterpreted by some as a blanket license to corrupt the telecom sector, in particular, and Philippine businesses and industries, in general. The situation does not serve the interests of the Republic of the Philippines. All we have now is a hodge-podge of disparate laws that offer no stiff protection to Filipinos in the face of new and reemerging monopolies, or abusive companies, in the telecom sector and beyond. Addressing this situation will send a message to domestic and international investors that the Philippines offers fair opportunities, and does not play favorites, especially to big, moneyed and influential businessmen. Please also allow me to address issues raised earlier I was following the tweets especially the need for a genuine consumer movement, a consumer union that goes way beyond handing out hao shao awards. We agree. But consumer rights and welfare consciousness is a difficult task. we face so many hindrances contempt for complaining and complainants is deep-seated and embedded in schools, and reinforced in media. In the case of the PLDT buyout of Digitel/SunCellular, we saw most of the media swallow hook, line and sinker the lie or spin that it was/is a done deal. Coverage was largely one-sided and shallow. That doesnt help and also illustrates the overarching power of economic elites and monopolists viz. media. These are hindrances and stumbling blocks and it would take much persistence, patience, grit, and united action by consumers to be able to form and propel their union and movement. What we want to see, moving forward, in the telecom sector are: (1) a clear vision from the government on the role of information and communications technology in nationbuilding; (2) vibrant competition on telecom services made available to end-users, MSMEs, government and industry; (3) the provision of internet access to the entire archipelago through a national broadband network free from graft; (4) the dismantling of monopolies and cartel operations in the telecom sector; and (5) the formation of a movement and union of consumers that demand better business practices and better services. Thank you.

Competition law, known in the United States as antitrust law, is law that promotes or maintains market competition by regulating anti-competitive conduct by [1] companies. The history of competition law reaches back to the Roman Empire. The business practices of market traders, guilds and governments have always been subject to scrutiny, and sometimes severe sanctions. Since the 20th century, competition law has become global. The two largest and most influential systems of competition regulation are United States antitrust law and European Union competition law. National and regional competition authorities across the world have formed international support and enforcement networks. Modern competition law has historically evolved on a country level to promote and maintain competition in markets principally within the territorial boundaries of nation-states. National competition law usually does not cover activity beyond territorial borders unless it has significant effects at nation-state level.[1] Countries may allow for extraterritorial jurisdiction in competition cases based on so-called effects doctrine.[1][2] The protection of international competition is governed by international competition agreements. In 1945, during the negotiations preceding the adoption of theGeneral Agreement on Tariffs and Trade (GATT) in 1947, limited international competition obligations were proposed within the Charter for an International Trade Organisation. These obligations were not included in GATT, but in 1994, with the conclusion of the Uruguay Round of GATT Multilateral Negotiations, the World Trade Organization (WTO) was created. The Agreement Establishing the WTO included a range of limited provisions on various cross-border competition issues on a sector specific basis.[3]

Contents [hide]

1 Principle 2 History
o o o

2.1 Roman legislation 2.2 Middle ages 2.3 Early competition law in Europe 3.1 United States antitrust 3.2 European Union law 3.3 International expansion

3 Modern competition law

o o o

4 Enforcement 5 Theory
o o o

5.1 Classical perspective 5.2 Neo-classical synthesis 5.3 Chicago School 6.1 Collusion and cartels 6.2 Dominance and monopoly 6.3 Mergers and acquisitions 6.4 Public sector regulation 6.5 Intellectual property, innovation and competition

6 Practice
o o o o o

7 See also 8 Notes 9 References 10 Further reading 11 External links [edit]Principle Competition law, or antitrust law, has three main elements:

prohibiting agreements or practices that restrict free trading and competition between business. This includes in particular the repression of free trade caused by cartels.

banning abusive behavior by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position. Practices controlled in this way may include predatory pricing, tying, price gouging, refusal to deal, and many others. supervising the mergers and acquisitions of large corporations, including some joint ventures. Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to "remedies" such as an obligation to divest part of the merged business or to offer licenses or access to facilities to enable other businesses to continue competing.

Substance and practice of competition law varies from jurisdiction to jurisdiction. Protecting the interests of consumers (consumer welfare) and ensuring that entrepreneurs have an opportunity to compete in the market economy are often treated as important objectives. Competition law is closely connected with law on deregulation of access to markets, state aids and subsidies, theprivatization of state owned assets and the establishment of independent sector regulators, among other market-oriented supply-side policies. In recent decades, competition law has been viewed as a way to provide better public services.[4] Robert Bork has argued that competition laws can produce adverse effects when they reduce competition by protecting inefficient competitors and when costs of legal intervention are greater than benefits for the consumers.[5] Ideas about competitive law were published during the 18th century with such works as Adam Smith's The Wealth of Nations. Different terms were used to describe this area of the law, including "restrictive practices," "the law of monopolies," "combination acts" and the "restraint of trade." [edit]History Main article: History of competition law [edit]Roman legislation An early example of competition law can be found in Roman law. The Lex Julia de Annona was enacted during the Roman Republic around 50 BC.[6] To protect the grain trade, heavy fines were imposed on anyone directly, deliberately, and insidiously stopping supply ships.[7] Under Diocletian in 301 AD, an edict imposed the death penalty for anyone violating a tariff system, for example by buying up, concealing, or contriving the scarcity of everyday goods.[7] More legislation came under the constitution of Zeno of 483 AD, which can be traced into Florentine Municipal laws of 1322 and 1325.[8] This provided for confiscation of property and banishment for any trade combination or joint action of monopolies private or granted by the Emperor. Zeno rescinded all previously granted exclusive rights.[9] Justinian I subsequently introduced legislation to pay officials to manage state monopolies.[9] [edit]Middle ages Legislation in England to control monopolies and restrictive practices were in force well before the Norman Conquest.[9] The Domesday Book recorded that "foresteel" (i.e.

forestalling, the practice of buying up goods before they reach market and then inflating the prices) was one of three forfeitures that King Edward the Confessor could carry out through England.[10] But concern for fair prices also led to attempts to directly regulate the market. Under Henry III an act was passed in 1266 [11] to fix bread and ale prices in correspondence with grain prices laid down by the assizes. Penalties for breach included amercements, pillory and tumbrel.[12] A 14th century statute labelled forestallers as "oppressors of the poor and the community at large and enemies of the whole country."[13] Under King Edward III the Statute of Labourers of 1349[14] fixed wages of artificers and workmen and decreed that foodstuffs should be sold at reasonable prices. On top of existing penalties, the statute stated that overcharging merchants must pay the injured party double the sum he received, an idea that has been replicated in punitive treble damages under US antitrust law. Also under Edward III, the following statutory provision outlawed trade combination.[15] "...we have ordained and established, that no merchant or other shall make Confederacy, Conspiracy, Coin, Imagination, or Murmur, or Evil Device in any point that may turn to the Impeachment, Disturbance, Defeating or Decay of the said Staples, or of anything that to them pertaineth, or may pertain." In continental Europe competition principles developed in Lex Mercatoria. Examples of legislation enshrining competition principles include the constitutiones juris metallici by Wenceslaus II ofBohemia between 1283 and 1305, condemning combination of ore traders increasing prices; the Municipal Statutes of Florence in 1322 and 1325 followed Zeno's legislation against state monopolies; and under Emperor Charles V in the Holy Roman Empire a law was passed "to prevent losses resulting from monopolies and improper contracts which many merchants and artisans made in the Netherlands." In 1553 King Henry VIII reintroduced tariffs for foodstuffs, designed to stabilize prices, in the face of fluctuations in supply from overseas. So the legislation read here that whereas, "it is very hard and difficult to put certain prices to any such things... [it is necessary because] prices of such victuals be many times enhanced and raised by the Greedy Covetousness and Appetites of the Owners of such Victuals, by occasion of ingrossing and regrating the same, more than upon any reasonable or just ground or cause, to the great damage and impoverishing of the King's subjects."[16] Around this time organizations representing various tradesmen and handicrafts people, known as guilds had been developing, and enjoyed many concessions and exemptions from the laws against monopolies. The privileges conferred were not abolished until the Municipal Corporations Act 1835.

[edit]Early competition law in Europe

Judge Coke in the 17th century thought that general restraints on trade were unreasonable The English common law of restraint of trade is the direct predecessor to modern competition law later developed in the US.[17] It is based on the prohibition of agreements that ran counter to public policy, unless the reasonableness of an agreement could be shown. It effectively prohibited agreements designed to restrain another's trade. The 1414 Dyer's is the first known restrictive trade agreement to be examined under English common law. A dyer had given a bond not to exercise his trade in the same town as the plaintiff for six months but the plaintiff had promised nothing in return. On hearing the plaintiff's attempt to enforce this restraint, Hull J exclaimed, "per Dieu, if the plaintiff were here, he should go to prison until he had paid a fine to the King." The court denied the collection of a bond for the dyer's breach of agreement because the agreement was held to be a restriction on trade.[18] English courts subsequently decided a range of cases which gradually developed competition related case law, which eventually were transformed into statute law.[19]

Elizabeth I assured monopolies would not be abused in the early era of globalization Europe around the 16th century was changing quickly. The new world had just been opened up, overseas trade and plunder was pouring wealth through the international economy and attitudes among businessmen were shifting. In 1561 a system of Industrial Monopoly Licenses, similar to modern patents had been introduced into England. But by the reign of Queen Elizabeth I, the system was reputedly much abused and used merely to preserve privileges, encouraging nothing new in the way of innovation or manufacture.[20] In response English courts developed case law on restrictive business practices. The statute followed the unanimous decision in Darcy v. Allein 1602, also known as the Case of Monopolies,[21] of the King's benchto declare void the sole right that Queen Elizabeth I had granted to Darcy to import playing cards into England.[19] Darcy, an officer of the Queen's household, claimed damages for the defendant's infringement of this right. The court found the grant void and that three characteristics of monopoly were (1) price increases (2) quality decrease (3) the tendency to reduce artificers to idleness and beggary. This put an end to granted monopolies until King James I began to grant them again. In 1623 Parliament passed the Statute of Monopolies, which for the most part excludedpatent rights from its prohibitions, as well as guilds. From King Charles I, through the civil war and to King Charles II, monopolies continued, especially useful for raising revenue. [22] Then in 1684, in East India Company v. Sandys it was decided that exclusive rights to trade only outside the realm were legitimate, on the grounds that only large and powerful concerns could trade in the conditions prevailing overseas.[23] The development of early competition law in England and Europe progressed with the diffusion of Adam Smith's work, who first established the concept of the market economy. At the same timeindustrialisation replaced the individual artisan, or group of artisans, with paid labourers and machine-based production. Commercial success increasingly dependent on maximising production while minimising cost. Therefore the size of a company became increasingly important and a number of European countries responded by enacting laws to regulate large companies which restricted trade. Following the French Revolution in 1789 the law of 1417 June 1791 declared agreements by members of the same trade that fixed the price of an industry or labour as void, unconstitutional, and hostile to liberty. Similarly the Austrian Penal Code of 1852 established that "agreements... to raise the price of a commodity... to the disadvantage of the public' should be punished as misdemeanours." Austria passed a law in 1870 abolishing the penalties, though such agreements remained void. However, in Germany laws clearly validated agreements between firms to raise prices. Throughout the 18th and 19th century ideas that dominant private companies or legal monopolies could excessively restrict trade were further developed in Europe. However, as in the late 19th century a depression spread through Europe, known as the Panic of 1873, ideas of competition lost favour and it was felt that companies had to cooperate by forming cartels to withstand huge pressures on prices and profits.[24]

[edit]Modern competition law Competition country G-20 major economies Australia China India Japan Russia United Kingdom United Union Other economies Ireland This box:

law

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edit While the development of competition law stalled in Europe during the late 19th century, in 1889 Canada enacted what is considered the first competition statute of modern times. The Act for the Prevention and Suppression of Combinations formed in restraint of Trade was passed one year before the United States enacted the most famous legal statute on competition law, the Sherman Act of 1890. It was named after Senator John Sherman who argued that the Act "does not announce a new principle of law, but applies old and well recognised principles of common law". [25] [edit]United States antitrust Main article: United States antitrust law The Sherman Act of 1890 attempted to outlaw the restriction of competition by large companies, who co-operated with rivals to fix outputs, prices and market shares, initially through pools and later through trusts. Trusts first appeared in the US railroads, where the capital requirement of railroad construction precluded competitive services in then scarcely settled territories. This trust allowed railroads to

discriminate on rates imposed and services provided to consumers and businesses and to destroy potential competitors. Different trusts could be dominant in different industries. The Standard Oil Company trust in the 1880s controlled a number of markets, including the market in fuel oil, lead and whiskey.[25] Vast numbers of citizens became sufficiently aware and publicly concerned about how the trusts negatively impacted them that the Act became a priority for both major parties. A primary concern of this act is that competitive markets themselves should provide the primary regulation of prices, outputs, interests and profits. Instead, the Act outlawed anticompetitive practices, codifying the common law restraint of trade doctrine. [26] Prof Rudolph Peritz has argued that competition law in the United States has evolved around two sometimes conflicting concepts of competition: first that of individual liberty, free of government intervention, and second a fair competitive environment free of excessive economic power. Since the enactment of the Sherman Act enforcement of competition law has been based on various economic theories adopted by Government.[27] Section 1 of the Sherman Act declared illegal "every contract, in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations". Section 2 prohibits monopolies, or attempts and conspiracies to monopolize. Following the enactment in 1890 US court applies these principles to business and markets. Courts applied the Act without consistent economic analysis until 1914, when it was complemented by the Clayton Act which specifically prohibited exclusive dealing agreements, particularly tying agreements and interlocking directorates, and mergers achieved by purchasing stock. From 1915 onwards the rule of reason analysis was frequently applied by courts to competition cases. However, the period was characterized by the lack of competition law enforcement. From 1936 to 1972 courts' application of anti-trust law was dominated by the structure-conduct-performance paradigm of the Harvard School. From 1973 to 1991, the enforcement of anti-trust law was based on efficiency explanations as the Chicago School became dominant. Since 1992 game theory has frequently been used in anti-trust cases.[28] [edit]European Union law Main article: European Union competition law Competition law gained new recognition in Europe in the inter-war years, with Germany enacting its first anti-cartel law in 1923 and Sweden and Norway adopting similar laws in 1925 and 1926 respectively. However, with the Great Depression of 1929 competition law disappeared from Europe and was revived following the second world war when the United Kingdom and Germany, following pressure from the United States, became the first European countries to adopt fully fledged competition laws. At a regional level EU competition law has its origins in the European Coal and Steel Community (ECSC) agreement between France, Italy, Belgium, the Netherlands, Luxembourg and Germany in 1951 following the Second World War. The agreement aimed to prevent Germany from re-establishing dominance in the production of coal and steel as it was felt that this dominance had contributed to the

outbreak of the war. Article 65 of the agreement banned cartels and article 66 made provisions for concentrations, or mergers, and the abuse of a dominant position by companies.[29] This was the first time that competition law principles were included in a plurilateral regional agreement and established the trans-European model of competition law. In 1957 competition rules were included in the Treaty of Rome, also known as the EC Treaty, which established the European Economic Community (EEC). The Treaty of Rome established the enactment of competition law as one of the main aims of the EEC through the "institution of a system ensuring that competition in the common market is not distorted". The two central provisions on EU competition law on companies were established in article 85, which prohibited anti-competitive agreements, subject to some exemptions, and article 86 prohibiting the abuse of dominant position. The treaty also established principles on competition law for member states, with article 90 covering public undertakings, and article 92 making provisions on state aid. Regulations on mergers were not included as member states could not establish consensus on the issue at the time.[30] Today, the Treaty of Lisbon prohibits anti-competitive agreements in Article 101(1), including price fixing. According to Article 101(2) any such agreements are automatically void. Article 101(3) establishes exemptions, if the collusion is for distributional or technological innovation, gives consumers a "fair share" of the benefit and does not include unreasonable restraints that risk eliminating competition anywhere (or compliant with the general principle of European Union law of proportionality). Article 102 prohibits the abuse of dominant position, such as price discrimination and exclusive dealing. Article 102 allows the European Council regulations to govern mergers between firms (the current regulation is the Regulation 139/2004/EC).[31] The general test is whether a concentration (i.e. merger or acquisition) with a community dimension (i.e. affects a number of EU member states) might significantly impede effective competition. Articles 106 and 107 provide that member state's right to deliver public services may not be obstructed, but that otherwise public enterprises must adhere to the same competition principles as companies. Article 107 lays down a general rule that the state may not aid or subsidize private parties in distortion of free competition and provides exemptions for charities, regional development objectives and in the event of a natural disaster.[citation needed] [edit]International expansion By 2008 111 countries had enacted competition laws, which is more than 50 percent of countries with a population exceeding 80,000 people. 81 of the 111 countries had adopted their competition laws in the past 20 years, signalling the spread of competition law following the collapse of the Soviet Union and the expansion of the European Union.[32] [edit]Enforcement See also: World Trade Organization and International Competition Network

There is considerable controversy amongWTO members, in green, whether competition law should form part of the agreements At a national level competition law is enforced through competition authorities, as well as private enforcement. The United States Supreme Courtexplained:[33] Every violation of the antitrust laws is a blow to the free-enterprise system envisaged by Congress. This system depends on strong competition for its health and vigor, and strong competition depends, in turn, on compliance with antitrust legislation. In enacting these laws, Congress had many means at its disposal to penalize violators. It could have, for example, required violators to compensate federal, state, and local governments for the estimated damage to their respective economies caused by the violations. But, this remedy was not selected. Instead, Congress chose to permit all persons to sue to recover three times their actual damages every time they were injured in their business or property by an antitrust violation.

In the European Union, the Modernisation Regulation 1/2003[34] means that the European Commission is no longer the only body capable of public enforcement of European Union competition law. This was done to facilitate quicker resolution of competition-related inquiries. In 2005 the Commission issued a Green Paper on Damages actions for the breach of the EC antitrust rules ,[35] which suggested ways of making private damages claims against cartels easier.[36] Antitrust administration and legislation can be seen as a balance between:

guidelines which are clear and specific to the courts, regulators and business but leave little room for discretion that prevents the application of laws from resulting in unintended consequences. guidelines which are broad, hence allowing administrators to sway between improving economic outcomes versus succumbing to political policies to redistribute wealth.[37]

Chapter 5 of the post war Havana Charter contained an Antitrust code[38] but this was never incorporated into the WTO's forerunner, the General Agreement on Tariffs and Trade 1947. Office of Fair Trading Director and Professor Richard Whish wrote sceptically that it "seems unlikely at the current stage of its development that the WTO will metamorphose into a global competition authority." [39] Despite that, at the

ongoing Doha round of trade talks for the World Trade Organization, discussion includes the prospect of competition law enforcement moving up to a global level. While it is incapable of enforcement itself, the newly established International Competition Network[40] (ICN) is a way for national authorities to coordinate their own enforcement activities. [edit]Theory Main article: Competition law theory [edit]Classical perspective See also: Classical economics Under the doctrine of laissez-faire, antitrust is seen as unnecessary as competition is viewed as a long-term dynamic process where firms compete against each other for market dominance. In some markets a firm may successfully dominate, but it is because of superior skill or innovativeness. However, according to laissez-faire theorists, when it tries to raise prices to take advantage of its monopoly position it creates profitable opportunities for others to compete. A process of creative destruction begins which erodes the monopoly. Therefore, government should not try to break up monopoly but should allow the market to work.[41]

John

Stuart

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preserveliberty and competition The classical perspective on competition was that certain agreements and business practice could be an unreasonable restraint on the individual libertyof tradespeople to carry on their livelihoods. Restraints were judged as permissible or not by courts as new cases appeared and in the light of changing business circumstances. Hence the courts found specific categories of agreement, specific clauses, to fall foul of their doctrine on economic fairness, and they did not contrive an overarching conception of

market power. Earlier theorists like Adam Smith rejected any monopoly power on this basis. "A monopoly granted either to an individual or to a trading company has the same effect as a secret in trade or manufactures. The monopolists, by keeping the market constantly under-stocked, by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate."[42] In The Wealth of Nations (1776) Adam Smith also pointed out the cartel problem, but did not advocate specific legal measures to combat them. "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary."[43] By the latter half of the 19th century it had become clear that large firms had become a fact of the market economy. John Stuart Mill's approach was laid down in his treatise On Liberty (1859). "Again, trade is a social act. Whoever undertakes to sell any description of goods to the public, does what affects the interest of other persons, and of society in general; and thus his conduct, in principle, comes within the jurisdiction of society... both the cheapness and the good quality of commodities are most effectually provided for by leaving the producers and sellers perfectly free, under the sole check of equal freedom to the buyers for supplying themselves elsewhere. This is the so-called doctrine of Free Trade, which rests on grounds different from, though equally solid with, the principle of individual liberty asserted in this Essay. Restrictions on trade, or on production for purposes of trade, are indeed restraints; and all restraint, qua restraint, is an evil..."[44] [edit]Neo-classical synthesis See also: Neoclassical synthesis

Paul Samuelson, author of the 20th century's most successful economics text, combined mathematical models andKeynesian macroeconomic intervention. He advocated the general success of the market but backed the American government's antitrust policies. After Mill, there was a shift in economic theory, which emphasized a more precise and theoretical model of competition. A simple neo-classical model of free markets holds that production and distribution of goods and services in competitive free markets maximizes social welfare. This model assumes that new firms can freely enter markets and compete with existing firms, or to use legal language, there are no barriers to entry. By this term economists mean something very specific, that competitive free markets deliver allocative, productive and dynamic efficiency. Allocative efficiency is also known as Pareto efficiency after the Italian economist Vilfredo Pareto and means that resources in an economy over the long run will go precisely to those who are willing and able to pay for them. Because rational producers will keep producing and selling, and buyers will keep buying up to the lastmarginal unit of possible output or alternatively rational producers will be reduce their output to the margin at which buyers will buy the same amount as produced there is no waste, the greatest number wants of the greatest number of people become satisfied and utility is perfected because resources can no longer be reallocated to make anyone better off without making someone else worse off; society has achieved allocative efficiency. Productive efficiency simply means that society is making as much as it can. Free markets are meant to reward those who work hard, and therefore those who will put society's resources towards the frontier of its possible production.[45] Dynamic efficiency refers to the idea that business which constantly competes must research, create and innovate to keep its share of consumers. This traces to Austrian-American political scientist Joseph Schumpeter's notion that a "perennial gale of creative

destruction" is ever sweeping through capitalist economies, driving enterprise at the market's mercy.[46] This led Schumpeter to argue that monopolies did not need to be broken up (as with Standard Oil) because the next gale of economic innovation would do the same. Contrasting with the allocatively, productively and dynamically efficient market model are monopolies, oligopolies, and cartels. When only one or a few firms exist in the market, and there is no credible threat of the entry of competing firms, prices rise above the competitive level, to either a monopolistic or oligopolistic equilibrium price. Production is also decreased, further decreasing social welfare by creating a deadweight loss. Sources of this market power are said[by whom?] to include the existence of externalities, barriers to entry of the market, and the free rider problem. Markets may fail to be efficient for a variety of reasons, so the exception of competition law's intervention to the rule of laissez faire is justified if government failure can be avoided. Orthodox economists fully acknowledge that perfect competition is seldom observed in the real world, and so aim for what is called "workable competition".[47][48] This follows the theory that if one cannot achieve the ideal, then go for the second best option[49] by using the law to tame market operation where it can. [edit]Chicago School

Robert Bork See also: Chicago school of economics and Neoclassical economics A group of economists and lawyers, who are largely associated with the University of Chicago, advocate an approach to competition law guided by the proposition that some actions that were originally considered to be anticompetitive could actually promote competition.[50] The U.S. Supreme Court has used the Chicago School approach in several recent cases.[51] One view of the Chicago School approach to

antitrust is found in United States Circuit Court of Appeals Judge Richard Posner's books Antitrust Law[52] and Economic Analysis of Law.[53] Robert Bork was highly critical of court decisions on United States antitrust law in a series of law review articles and his book The Antitrust Paradox.[54]Bork argued that both the original intention of antitrust laws and economic efficiency was the pursuit only of consumer welfare, the protection of competition rather than competitors.[55] Furthermore, only a few acts should be prohibited, namely cartels that fix prices and divide markets, mergers that create monopolies, and dominant firms pricing predatorily, while allowing such practices as vertical agreements and price discrimination on the grounds that it did not harm consumers. [56] Running through the different critiques of US antitrust policy is the common theme that government interference in the operation of free markets does more harm than good. [57] "The only cure for bad theory", writes Bork, "is better theory".[55] The lateHarvard Law School Professor Philip Areeda, who favours more aggressive antitrust policy, in at least one Supreme Court case challenged Robert Bork's preference for nonintervention.[58] [edit]Practice [edit]Collusion and cartels Main articles: Collusion and Cartel

Scottish Enlightenment philosopher Adam Smith was an early enemy of cartels

[edit]Dominance and monopoly Main articles: Dominance (economics) and Monopoly

The economist's depiction of deadweight loss to efficiency that monopolies cause When firms hold large market shares, consumers risk paying higher prices and getting lower quality products than compared to competitive markets. However, the existence of a very high market share does not always mean consumers are paying excessive prices since the threat of new entrants to the market can restrain a high-market-share firm's price increases. Competition law does not make merely having a monopoly illegal, but rather abusing the power that a monopoly may confer, for instance through exclusionary practices. First it is necessary to determine whether a firm is dominant, or whether it behaves "to an appreciable extent independently of its competitors, customers and ultimately of its consumer."[59] Under EU law, very large market shares raise a presumption that a firm is dominant,[60] which may be rebuttable.[61] If a firm has a dominant position, then there is "a special responsibility not to allow its conduct to impair competition on the common market".[62] Similarly as with collusive conduct, market shares are determined with reference to the particular market in which the firm and product in question is sold. Then although the lists are seldom closed,[63] certain categories of abusive conduct are usually prohibited under the country's legislation. For instance, limiting production at a shipping port by refusing to raise expenditure and update technology could be abusive.[64] Tying one product into the sale of another can be considered abuse too, being restrictive of consumer choice and depriving competitors of outlets. This was the alleged case in Microsoft v. Commission[65] leading to an eventual fine of 497 million for including its Windows Media Player with the Microsoft Windows platform. A refusal to supply a facility which is essential for all businesses attempting to compete to use can constitute an abuse. One example was in a case involving a medical company named Commercial Solvents.[66] When it set up its own rival in the tuberculosis drugs market, Commercial Solvents were forced to continue

supplying a company named Zoja with the raw materials for the drug. Zoja was the only market competitor, so without the court forcing supply, all competition would have been eliminated. Forms of abuse relating directly to pricing include price exploitation. It is difficult to prove at what point a dominant firm's prices become "exploitative" and this category of abuse is rarely found. In one case however, a French funeral service was found to have demanded exploitative prices, and this was justified on the basis that prices of funeral services outside the region could be compared.[67] A more tricky issue is predatory pricing. This is the practice of dropping prices of a product so much that one's smaller competitors cannot cover their costs and fall out of business. The Chicago School (economics) considers predatory pricing to be unlikely.[68] However in France Telecom SA v. Commission[69] a broadband internet company was forced to pay 10.35 million for dropping its prices below its own production costs. It had "no interest in applying such prices except that of eliminating competitors"[70] and was being cross-subsidized to capture the lion's share of a booming market. One last category of pricing abuse is price discrimination.[71] An example of this could be offering rebates to industrial customers who export your company's sugar, but not to customers who are selling their goods in the same market as you are in.[72] [edit]Mergers and acquisitions Main article: Mergers and acquisitions A merger or acquisition involves, from a competition law perspective, the concentration of economic power in the hands of fewer than before.[73] This usually means that one firm buys out the shares of another. The reasons for oversight of economic concentrations by the state are the same as the reasons to restrict firms who abuse a position of dominance, only that regulation of mergers and acquisitions attempts to deal with the problem before it arises, ex ante prevention of market dominance.[74] In the United States merger regulation began under the Clayton Act, and in the European Union, under the Merger Regulation 139/2004 (known as the "ECMR").[75] Competition law requires that firms proposing to merge gain authorization from the relevant government authority. The theory behind mergers is that transaction costs can be reduced compared to operating on an open market through bilateral contracts.[76] Concentrations can increase economies of scale and scope. However often firms take advantage of their increase in market power, their increased market share and decreased number of competitors, which can adversely affect the deal that consumers get. Merger control is about predicting what the market might be like, not knowing and making a judgment. Hence the central provision under EU law asks whether a concentration would if it went ahead "significantly impede effective competition... in particular as a result of the creation or strengthening off a dominant position..."[77] and the corresponding provision under US antitrust states similarly, "No person shall acquire, directly or indirectly, the whole or any part of the stock or other share capital... of the assets of one or more persons engaged in commerce or in any activity affecting commerce, where... the effect of such acquisition, of such stocks

or assets, or of the use of such stock by the voting or granting of proxies or otherwise, may be substantially to lessen competition, or to tend to create a monopoly.[78] What amounts to a substantial lessening of, or significant impediment to competition is usually answered through empirical study. The market shares of the merging companies can be assessed and added, although this kind of analysis only gives rise to presumptions, not conclusions.[79] The Herfindahl-Hirschman Index is used to calculate the "density" of the market, or what concentration exists. Aside from the maths, it is important to consider the product in question and the rate of technical innovation in the market.[80] A further problem of collective dominance, oroligopoly through "economic links"[81] can arise, whereby the new market becomes more conducive to collusion. It is relevant how transparent a market is, because a more concentrated structure could mean firms can coordinate their behavior more easily, whether firms can deploy deterrents and whether firms are safe from a reaction by their competitors and consumers.[82] The entry of new firms to the market, and any barriers that they might encounter should be considered.[83] If firms are shown to be creating an uncompetitive concentration, in the US they can still argue that they create efficiencies enough to outweigh any detriment, and similar reference to "technical and economic progress" is mentioned in Art. 2 of the ECMR. [84] Another defense might be that a firm which is being taken over is about to fail or go insolvent, and taking it over leaves a no less competitive state than what would happen anyway.[85] Mergers vertically in the market are rarely of concern, although in AOL/Time Warner[86] the European Commission required that a joint venture with a competitor Bertelsmann be ceased beforehand. The EU authorities have also focused lately on the effect of conglomerate mergers, where companies acquire a large portfolio of related products, though without necessarily dominant shares in any individual market.[87] [edit]Public sector regulation Public sector industries, or industries which are by their nature providing a public service, are involved in competition law in many ways similar to private companies. Many industries, such as railways, electricity, gas, water and media have their own independent sector regulators. These government agencies are charged with ensuring that private providers carry out certain public service duties in line of social welfare goals. For instance, an electricity company may not be allowed to disconnect someone's supply merely because they have not paid their bills up to date, because that could leave a person in the dark and cold just because they are poor. Instead the electricity company would have to give the person a number of warnings and offer assistance until government welfare support kicks in. [edit]Intellectual property, innovation and competition Competition law has become increasingly intertwined with intellectual property, such as copyright, trademarks, patents, industrial design rights and in some jurisdictions trade secrets.[88] On the one hand, it is believed that promotion of innovation through enforcement of intellectual property rights promotes

competitiveness, while on the other the contrary may be the consequence. The question rests on whether it is legal to acquire monopoly through accumulation of intellectual property rights. In which case, the judgment needs to decide between giving preference to intellectual property rights or towards promoting competitiveness:

Should antitrust laws accord special treatment to intellectual property. Should intellectual rights be revoked or not granted when antitrust laws are violated.

Concerns also arise over anti-competitive effects and consequences due to:

Intellectual properties that are collaboratively designed with consequence of violating antitrust laws (intentionally or otherwise). The further effects on competition when such properties are accepted into industry standards. Cross-licensing of intellectual property. Bundling of intellectual property rights to long term business transactions or agreements to extend the market exclusiveness of intellectual property rights beyond their statutory duration. Trade secrets, if they remain a secret, having an eternal length of life.

Some scholars suggest that a prize instead of patent would solve the problem of deadweight loss, when innovators got their reward from the prize, provided by the government or non-profit organization, rather than directly selling to the market, see Millennium Prize Problems. However innovators may accept the prize only when it is at least as much as how much they earn from patent, which is a question difficult to determine.[89]

Quotes Competition brings out the best in products and the worst in people." - David Sarnoff, Pioneer of American Commercial Radio and TV

The early bird gets the worm, but the second mouse gets the cheese. Willie Nelson Play to Dondi Scumaci win, not to "not preserve victory to over the lose". loser.

Law is made by the winner Toba Beta, Betelgeuse Incident

Nobody's going to win all the time. On the highway of life you can't always be in the fast lane. Haruki Murakami, What I Talk About When I Talk About Running Competition is a rude Toba Beta, Master of Stupidity yet effective motivation.

Companies arent families. Theyre battlefields in a civil war. Charles Duhigg, The Power of Habit: Why We Do What We Do in Life and Business Competition is not only the basis of protection to the consumer, but is the incentive to progress. Herbert hoover Competition creates better products, alliances create better companies. Brian Graham quotes The higher we soar, the smaller we appear to those who cannot fly. - Friedrich Wilhelm Nietzsche They And that if stand they high, fall, have they many dash blasts to themselves shake to them; pieces.

Shakespeare.

Competition policy is increasingly becoming an integral part of economic reform programs of developing economies like the Philippines. After more than three decades of protectionism and highly concentrated industries, the shift toward a more open economy through liberalization, deregulation and privatization has highlighted the role of competition policy in our economy. As we rely more on market mechanisms and less on government intervention to achieve economic progress, we need sound competition policy to ensure that the market works effectively and produces economic efficiency. Much of the world is already striving to deal with the impact of globalization where the integration of economies has broken down barriers to trade and opened wide the marketplace. But before we can even think about globalization, we need to

craft our own domestic competition policy. In so doing, we will be able to enhance the competitive behavior and technical efficiency of our industries and make them better to compete with foreign firms. These will eventually make our economy more attractive to foreign investment. Moreover, since the Philippines has no established competition policy to date and its antitrust law is hardly implemented nor effective, the need for a national competition policy acquires even greater urgency. In this light, we hope that the invaluable wealth of information contained in this book will be useful to and considered by our national leaders, policymakers and industry players. Conducted by authorities in their fields of research, the studies in this Volume aim to give us a mold by which to shape an effective Philippine competition policy. On behalf of the PASCN, I would therefore like to thank and congratulate the authors of this book for their diligence and commitment in coming up with these studies that are not only highly instructive but timely. Finally, I also wish to acknowledge all those who made possible the publication of this book. D uring the past decade, economic literature and policy discussions around the globe have been increasingly focused on competition policies. It is not that radically new concepts are being formulated. Rather, a growing need for new approaches in competition policies is being felt because of its significance to international trade, which have become highlighted with the reduction of trade barriers worldwide. Although justification for competition policies is well founded in economic literature, there is a need to understand their implications more fully, brought about not just by what is happening in the global arena but even more importantly by various comprehensive policy reforms that have been undertaken by the government during the past decade or so.

2 TOWARD A NATIONAL COMPETITION POLICY FOR THE PHILIPPINES The series of competition policy studies undertaken under the Philippine APEC Study Center Network (PASCN) recognizes the need for a new perspective, a new way of understanding the issues and hopefully, a better approach to reforming economic policies. The reforms starting in the mid-1980s have done much to move the economy toward a more market-friendly policy environment. Trade reforms, banking reforms, foreign investment policy reforms, deregulation, privatization and the policy thrusts in general have explicitly and implicitly recognized the benefits from competition. However, it is time to consider what more should be done. The next step is to examine the state of competition in the Philippine economy and determine how competition policies that would help sustain and maximize benefits from the reforms could be formulated. The studies presented in this volume are envisioned to be just the first stage toward achieving a workable competition policy for the Philippines. Given the decades of protectionism and regulation prior to reforms, a culture of competition in the country has not fully evolved. And while there may be a general consensus that competition is good, there is vagueness in the minds of many and uncertainty about the need for competition policy and how competition should be enforced. As the government becomes more involved in the development process in general and markets in particular, such a need would become more acute. It is ironic that for a developing country with usually less perfect markets, there is a greater need for an effective competition policy to encourage better use of scarce resources but there is less recognition of this need. It is thus timely for policymakers to pause and consider how competition policy has affected, promoted, or hindered competition and to look more closely at what role it could play. It is not that the government has done nothing to foster competition. As earlier

noted, the reforms the government has implemented starting in the mid-1980s have done much to enhance the state of competition in the different sectors of the economy, particularly in the liberalization and deregulation efforts. In the process, however, new problems emerge and the need for clearer competition rules becomes more apparent. This is especially true in the case of specific industry regulations. Moreover, while there is a proliferation of laws governing competition, there appears to be a lack of consistent, comprehensive, and rational competition policy. In short, the Philippines has undertaken major reforms in what could be considered the first layer of competition policy: trade reforms. It has also implemented steps in what could be considered the second layer of competition policy deregulationbut a lot more needs to be done with respect to how to move it a step further and develop more rational competition rules. Finally, the government, must, sooner or later, decide to what extent it wishes to implement what could be considered the third layer of competition policy, the core competition policy that deals directly with the anticompetitive behavior of firmsa working antitrust law. Hopefully, the studies in this volume would help shed some light on what needs to be done further. OBJECTIVES AND ROLE OF COMPETITION POLICY Almost everyone has a concept of what is competition. When one thinks of competition, one envisions a number of sellers/producers competing among each other to sell the most products to the most number of consumers. Quoting from the World Bank/OECD glossary, competition is: a situation in a market in which firms or sellers independently strive for the patronage of buyers in order to achieve a particular business objective, e. g., profits, sales and/or market share. Competition in this context is often equated with rivalry. Competitive rivalry between firms can occur when there are two firms or many firms. This rivalry may take place in terms of price, quality, service or combinations of these and other

factors which customers may value, or the process by which economic agents, acting independently in a market, limit each others ability to control the conditions prevailing in the market. Such a competitive situation may also be effected by market contestability. That is, competition comes not only from actual firms or sellers already in the market but also from firms or sellers that could enter and contest the market. In other words, when the market is contestable, the threat of entry is enough to provide competition. Monopolists and oligopolists would behave like perfect competitors when faced with threat of new entrants into the market (Baumol and Willig 1981). What does such a competitive setting accomplish? Why is competition desirable? Or, conversely, what is objectionable about a noncompetitive market setting? If there is competition, whether coming from existing rival firms or from the threat of new entrants into the market, the seller must make sure that he produces the best quality products at the least cost and sell his product at the price dictated by the market. Otherwise, he loses his clientele and his market share to some other seller who could do better. In other words, the producer/supplier has no market power. 1 That is, he cannot manipulate prices and extract excess profits (rents). And (as former Tariff Commissioner Abad puts it), he profits with honor. The end result is optimized welfare for all.