COMPETITION LAW COMPLIANCE

SYLLABUS
Atty. Leah Jose-Sebastian
Second Semester, Academic Year 2018-2019

COURSE OBJECTIVES
This elective course seeks to enable Law students -

1. To understand clearly the legal framework of Competition Law in the

Philippines, its legal basis and underlying economic objectives, preparatory to legal
practice in a business environment, whether as advocates for business firms or
consumers, or as Government regulators;

2. To identify business conduct, practices and agreements which could be

deemed anti-competitive under the Philippine Competition Act (Republic Act 10667)
and its IRR and other relevant competition-related laws as well as potential
Competition Law issues that could arise from various commercial activities and
business situations (including activities and situations governed by other laws),
evaluate their effects on competition and their legal consequences (including cost
of non-compliance), and craft relevant measures, remedies or alternatives to
problematic agreements, conduct and practices to eliminate or reduce the risk of
non-compliance, preparatory to legal counseling on Competition Law safeguards and
compliance as an integral part of socially responsible legal risk management; and

3. To identify windows of opportunity for pro-competitive business practices

and commercial activities under the Philippine Competition Act (PCA), preparatory
to providing legally defensible business solutions that enable, rather than limit, business
growth for the benefit of society in terms of wider choice of quality goods at competitive
prices.

INTRODUCTION

(i) Brief introduction of the Course

(ii) Overview: Competition in the real world
(iii) Nature and objective of competition law
(iv) Economic underpinnings of competition law

I. THE NECESSITY FOR COMPETITION LAW

1. 1987 Constitution, Article XII, Sec. 1, Sec. 6, Sec. 19

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 Cases:

Tatad vs Secretary of the Department of Energy

281 SCRA 330 (1997)

2. Republic Act No. 10667, Philippine Competition Act (PCA), Sec. 2

3. ASEAN Economic Blueprint (2008-2015) – Competition Policy

4. ASEAN Economic Blueprint 2025 – Strategic Measures for an effective

Competition Policy

II. EVOLUTION OF COMPETITION LAW IN THE PHILIPPINES

Pre-RA 10667: Mostly scattered sector-specific legal provisions

1. Act No. 3247, An Act to Prohibit Monopolies and Combinations in Restraint of

Trade
2. Revised Penal Code, Art. 186
3. Civil Code, Art. 28
4. Republic Act No. 776, Civil Aeronautics Act, Section 4
5. Insurance Code, as amended by RA 10607
6. RA 7581, Price Act, Section 5
7. Republic Act No. 8752, Anti-Dumping Act of 1999
8. Corporation Code, Section 79
9. Republic Act No. 8293, Intellectual Property Code, Chapter IX, Sec. 85, Sec. 87,
and Sec. 88
10. Republic Act No. 8762, Retail Trade Liberalization Act
11. Republic Act No. 9136, Electric Power Industry Reform Act of 2001
12. Republic Act No. 7394, Consumer Act
13. Republic Act No. 9502, Universally Accessible Cheaper and Quality Medicines
Act of 2008
14. Republic Act No. 8799, Securities Regulation Code, Sec 36.4, Sec. 37
15. Republic Act No. 9295, Domestic Shipping Development Act of 2004, Sec. 2 and
Sec. 8
16. Executive Order No. 45, Series of 2011, Designating the Department of Justice
as Competition Authority
17. Republic Act 8479, Downstream Oil Industry Deregulation Act of 1998

III. BASIC CONCEPTS AND PRINCIPLES

1. Agreements; Horizontal Agreements; Vertical Agreements

Horizontal- agreement of cooperation between 2 or more competitors or competing
businesses operating at the same level in the market

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 Vertical- agreements between firms at different levels of the supply chain

PCA, Sec. 4 (b)

PCA, Sec. 14 (a), (b), (c)

2. Entity; Single Economic Entity

Entity refers to any person, natural or juridical engaged directly or indirectly in any
economic activity;

PCA, Sec. 4 (h), Sec. 14, last paragraph

Case:

American Needle, Inc. v. National Football League

130 S. Ct. 2201 (2010)

3. Monopolies 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 of a particular
commodity

Case:

Agan, Jr. v. Philippine International Air Terminals Co., Inc.

402 SCRA 612

4. Cartels; hub and spoke cartels

Combination of agreements between two or more entities engaged in the

production, manufacture or sale designed to artificially and unreasonably
increase or manipulate its price.

RA 7581, Price Act, Section 5

PCA, Sec. 14 (a), (b)

5. Combinations in restraint of trade

An illegal agreement between two or more entitites to unjustly restrict competition
and monopolize trade.
Case:

Gokongwei v. Securities and Exchange Commission

89 SCRA 336

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6. Dominant position; Abuse of Dominance
Single dominance- one entity
Collective dominance- 2 or more

50% market share

except legal means, superior product or service,business acumen,
intellectual property
PCA, Sec. 4 (g), Sec. 15
IRR, Rule 8

7. Exclusivity and undue restraint of trade

restrictions upon trade may be upheld when not contrary to public

welfare and not greater than is necessary to afford a fair and
reasonable protection to the party in whose favor it is imposed

Case:

Avon Cosmetics, Inc. v. Luna

511 SCRA 376

8. Fair competition vs ruinous competition

Case:

Energy Regulatory Board v. Court of Appeals

357 SCRA 30 (2001)
9. Unfair Competition
(1) it must involve an injury to a competitor or trade rival, and (2) it must involve acts
which are characterized as "contrary to good conscience," or "shocking to judicial
sensibilities," or otherwise unlawful; in the language of our law, these include force,
intimidation, deceit, machination or any other unjust, oppressive or high-handed
method

Civil Code, Art. 28

Cases:

Willaware Products Corporation v. Jesichris Manufacturing Corporation

734 SCRA 238 (2014)

Coca-Cola Bottlers, Phils., Inc. (CCBPI) v. Gomez

571 SCRA 18 (2008)

10. Merger; Concentration

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 PCA, Sec. 4 (j)
PCA, Sec. 20
PCA, Sec. 21 (a)
Revised Corporation Code (RA 11232), Sec. 35 (g), (h), Sec. 39, Sec. 41
RCC, Sec. 75-79

11. Acquisition; Control

PCA, Sec. 4 (a), (f)

PCA, Sec. 25
Revised Corporation Code, Sec. 35 (f), (g), Sec. 43

12. Market; Relevant Market; Relevant Product Market; Relevant Geographic Market

PCA, Sec. 4 (i), (k)

PCA, Sec. 24
IRR, Rule 5
PCC Merger Review Guidelines, par. 5.10 up to par. 5.15 (See Hypothetical
Monopolist Test or SSNIP Test, cross-price elasticity of demand and diversion
ratios)

Cases:

Avon Cosmetics vs Luna

511 SCRA 376 (2006)
Smithkline Corporation v. Eli Lilly and Company
575 F.2d 1056 (3d Cir. 1978)

Brown Shoe Co., Inc. v. United States

370 U.S. 294 (1962)
United States v. E. I. du Pont de Nemours & Co.
351 US 377 (1956)

United States vs Pabst Brewing Co.

384 US 546 (1966)

13. Resale Price Maintenance; Interbrand competition; Intrabrand competition; Rule

of Reason

PCA, Sec. 14 (c)

PCA, Sec. 15 (e)

Case:

Leegin Creative Leather Products, Inc. v. PSKS, Inc.,

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 551 US 877 (2007)

IV. MONOPOLIES AND THE GOVERNMENT

1. 1987 Constitution, Art. XII, Sec. 11

Case:

Tawang Multi-Purpose Cooperative vs La Trinidad Water District

646 SCRA 21 (2011)

2. 1987 Constitution, Art. XII, Sec. 19

Cases:

Garcia vs Executive Secretary

583 SCRA 118 (2009)

Anglo-Fil Trading Corporation vs. Lazaro

124 SCRA 494 (1983)

3. PD 94, Creating the Philippine Cement Industry Authority

V. IN-SCOPE HARDCORE RESTRICTIONS PROHIBITED UNDER PCA

1. Scope and application of PCA

PCA, Sec. 3

2. Anti-competitive agreements prohibited per se

PCA, Sec. 14 (a1), (a2)

3. Abuse of dominant position

PCA, Sec. 15, Sec. 27; IRR, Rule 8, Sec. 2

Hoffman-La Roche v. Commission

Case 85/76 (13 February 1979)
https://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:61976CJ0085&from=EN
Read pp. 508-509, 514-524, 535-547

4. Anti-competitive mergers and acquisitions

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 PCA, Sec. 20, Sec. 21, Sec. 22
IRR, Rule 4, Sec. 1, Sec. 9, Sec. 10

VI. “WINDOWS OF OPPORTUNITY” WITHIN PCA

1. Rule of Reason Analysis

PCA, Sec. 14 (c)

Case:

Leegin Creative Leather Products, Inc. v. PSKS, Inc.,

551 US 877 (2007)

2. Exemptions from Prohibited Mergers and Acquisitions

PCA, Sec. 21

3. Exceptions to Anti-Competitive Agreements

PCA, Sec. 14 (c)

PCA, Sec 26
IRR, Rule 7

4. Exceptions to Abuse of Dominant Position

PCA, Sec. 15

5. Forbearance

PCA, Sec. 28

6. Trade Associations

PCA, Sec. 48

VII. COMPETITION LAW AND CONTRACTS

1. Contracts with unlawful cause

Civil Code, Article 1352

Revised Corporation Code, Section 58 (Voting Trust)

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2. Void and Inexistent Contracts

Civil Code, Article 1409 (1), (7)

Case:

Red Line Transportation Co., Inc. vs Bachrach Motor Company, Inc. and Rural
Transit Company, Inc.
G.R. No. L-45173, April 27, 1939

3. Parties in pari delicto

Civil Code, Article 1411

4. Interference with contractual relations

Civil Code, Article 1314

5. Tying arrangements and Exclusive Dealing Arrangements

PCA, Sec. 15 (c)

Case:

United States vs. Microsoft (Civil Action No. 98-1232 (TPJ)) BEN
Judge Jackson’s Conclusions of Law, April 2000
https://cyber.harvard.edu/msdoj/conclusions-l.html

6. Block-booking and Pooling Agreements

Case:

United States vs Paramount Pictures, Inc.

334 US 131 (1948)

7. Most favored nation (MFN) clause

Case:

European Commission Decision of 4.5.2017 in Case AT.40153 – E-book MFNs

and related matters
http://ec.europa.eu/competition/antitrust/cases/dec_docs/40153/40153_4392_3.p
df

8. Resale Price Maintenance

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VIII. COMPETITION LAW AND INTELLECTUAL PROPERTY LAW

1. UNCTAD Secretariat. (2016, August 17). Examining the interface between the
objectives of competition policy and intellectual property. Retrieved from
http://unctad.org/meetings/en/SessionalDocuments/ciclpd36_en.pdf

2. Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS),

Part II, Section 8

3. Prohibition on anti-competitive clauses in Technology Transfer Agreements

RA 8293, Sec. 87, Section 88

4. TRIPS Agreement, Part I, Article 8

5. Compulsory Licenses
RA 8293, Sec. 74, Sec. 93, Sec. 93-A, Sec. 97

6. Exhaustion of Patent Rights

RA 8293, Sec. 72.1

7. Exhaustion of Trademark Rights

RA 8293, Sec. 147.1, Sec. 159.4

IX. COMPETITION LAW AND E-COMMERCE

Competitive Benefits and Anti-competitive Dangers of E-Commerce

European Commission. (2017, May 10). Final report on the E-commerce Sector
Inquiry. Retrieved from
http://ec.europa.eu/competition/antitrust/sector_inquiry_final_report_en.pdf

Case:

European Union vs. Google

European Commission. (2017, June 27). Antitrust: Commission fines Google €2.42
billion for abusing dominance as search engine by giving illegal advantage to own
comparison shopping service – Factsheet. Retrieved from
http://europa.eu/rapid/press-release_MEMO-17-1785_en.htm

OECD Directorate for Enterprise and Financial Affairs. (2017, 26 May). Algorithms
and Collusion – Note by the United States. Retrieved from
https://www.ftc.gov/system/files/attachments/us-submissions-oecd-other-
international-competition-fora/algorithms.pdf

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X. COMPETITION LAW AND BIG DATA

Potential competition issues from possession and use of Big Data

Autorite de la concurrence and Budeskartellamt. (2016, May 10). Competition Law

and Data. Retrieved from
http://www.bundeskartellamt.de/SharedDocs/Publikation/DE/Berichte/Big%20Data%
20Papier.pdf?__blob=publicationFile&v=2

XI. RECOGNIZING ANTI-COMPETITIVE CONDUCT AND COMPETITION LAW

ISSUES

 Predatory Pricing
 Refusal to supply
 Group boycott
 Loyalty Rebates
 Growth Bonuses
 Exclusivity (e.g., ice cream freezer exclusivity)
 Tying and Bundling
 Open Book Pricing
 Sharing of Commercially Sensitive Information
 Use of Competitor Intelligence, Benchmarking
 Joint Purchasing
 Joint Research and Innovations
 Production Agreements (outsourcing, sub-contracting)
 Joint Marketing (e.g., co-branding)
 Joint Sustainability Initiatives
 Welcome Packs, Wargames and Wargames Language
 Standardization
 Category Management and Shelf Space Arrangements
XII. ENFORCEMENT AND REMEDIES

1. Powers, Functions and Jurisdiction of the Philippine Competition Commission

PCA, Chapter II, Section 12

PCA, Sec. 31, last paragraph
PCA, Sec. 32

2. Review of Mergers and Acquisitions

PCA, Chapter IV
PCA IRR, Rule 4
PCC Rules on Merger Procedure

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 PCC Merger Review Guidelines
PCC Memorandum Circular No. 18-001
PCC Clarificatory Notes on Notification
The treatment of joint ventures
PCC Commission Decisions on Mergers and Acquisitions at
http://phcc.gov.ph/category/resources/phcc-decisions/

Published Decisions:

Grab/Uber
SMIC/Goldilocks
Universal Robina/Central Azucarera de Don Pedro

3. Enforcement and Leniency

PCA, Chapter VII

PCC Rules of Procedure
PCC Rules of Leniency Program

4. Prohibition on Issuance of Injunction

Chapter VIII, Section 47

5. Dawn Raid Investigations

PCA, Section 12 (g)

6. Fines and Penalties

PCA, Chapter VI
PCA, Section 41
Act No. 3247, Section 6

7. Private Action; claim for damages under the Civil Code

PCA, Sec. 45
- Nothing follows –
Predatory pricing
Imposing barriers to entry
Tying or bundling
Monopsony
Imposing restrictions on the lease on the trade or goods
Imposing unfair selling price

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Limiting production
Discriminatory behavior

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