G.R. No. 132451. December 17, 1999.

* include a policy direction towards deregulation of the power

and energy industry.”
CONGRESSMAN ENRIQUE T. GARCIA, petitioner, vs. HON.
RENATO C. CORONA, in his capacity as the Executive Same; Same; Republic Act 8180 was struck down because, as
Secretary, HON. FRANCISCO VIRAY, in his capacity as the crafted, three key provisions plainly encouraged the continued
Secretary of Energy, CALTEX PHILIPPINES, INC., existence if not the proliferation of the constitutionally
PILIPINAS SHELL PETROLEUM CORP. and PETRON
proscribed evils of monopoly and restraint of trade.—The
CORP., respondents.
Court respects the legislative finding that deregulation is the
policy answer to the problems. It bears stressing that R.A. 8180
Constitutional Law; Commercial Law; Definition of Monopoly;
was declared invalid not because
Where two or three or a few companies act in concert to
control market prices and resultant profits, the monopoly is
________________
called an oligopoly or cartel.—The simplest form of monopoly
exists when there is only one seller or producer of a product or *
EN BANC.
service for which there are no substitutes. In its more complex
form, monopoly is defined as the joint acquisition or
219
maintenance by members of a conspiracy, formed for that
purpose, of the power to control and dominate trade and
commerce in a commodity to such an extent that they are able, VOL. 321, DECEMBER 17, 1999 219
as a group, to exclude actual or potential competitors from the Garcia vs. Corona
field, accompanied with the intention and purpose to exercise
such power. Where two or three or a few companies act in deregulation is unconstitutional. The law was struck down
concert to control market prices and resultant profits, the because, as crafted, three key provisions plainly encouraged the
monopoly is called an oligopoly or cartel. It is a combination in continued existence if not the proliferation of the
restraint of trade. constitutionally proscribed evils of monopoly and restraint of
trade.
Same; Same; The deregulation of the oil industry is a policy
determination of the highest order.—It bears reiterating at the Same; Same; The present petition lacks a factual foundation
outset that the deregulation of the oil industry is a policy specifically highlighting the need to declare the challenged
determination of the highest order. It is unquestionably a provision unconstitutional.—In sharp contrast, the present
priority program of Government. The Department of Energy petition lacks a factual foundation specifically highlighting the
Act of 1992 expressly mandates that the development and need to declare the challenged provision unconstitutional.
updating of the existing Philippine energy program “shall There is a dearth of relevant, reliable, and substantial evidence
to support petitioner’s theory that price control must continue
even as Government is trying its best to get out of regulating 220
the oil industry. The facts of the petition are, in the main, a
general dissertation on the evils of monopoly. 220 SUPREME COURT REPORTS ANNOTATED
Garcia vs. Corona
Same; Same; Deregulation means the lifting of control,
governance and direction through rule or regulation.—
our fundamental law. It is his imperative task therefore to
Deregulation means the lifting of control, governance and
adduce before the Court factual and legal bases to demonstrate
direction through rule or regulation. It means that the regulated
clearly and cogently the unconstitutionality of the acts of
industry is freed from the controls, guidance, and restrictions to
Congress and the President in adopting and implementing full
which it used to be subjected. The use of the word “partial” to
deregulation of petroleum prices at this time.
qualify deregulation is sugar-coating.
Same; Court cannot inquire into the wisdom or expediency of
PANGANIBAN, J., Separate Opinion:
the acts of the executive or the legislative department, unless
there is a clear showing of constitutional infirmity or grave
Constitutional Law; Policies and acts of the political
abuse of discretion amounting to lack or excess of jurisdiction;
departments of government may be voided by the Court on
Meaning of Grave Abuse of Discretion.—It is basic to our form
either of two grounds.—Doctrinally, policies and acts of the
of government that the Court cannot inquire into the wisdom or
political departments of government may be voided by this
expediency of the acts of the executive or the legislative
Court on either of two grounds—infringement of the
department, unless there is a clear showing of constitutional
Constitution or grave abuse of discretion. An infringement may
infirmity or grave abuse of discretion amounting to lack or
be proven by demonstrating that the words of the law directly
excess of jurisdiction. “By grave abuse of discretion is meant
contradict a provision of the fundamental law, or by presenting
such capricious and whimsical exercise of judgment as is
proof that the law authorizes or enables the respondents to
equivalent to lack of jurisdiction. Mere abuse of discretion is
violate the Constitution.
not enough. It must be grave abuse of discretion, as when the
power is exercised in an arbitrary or despotic manner by reason
Same; Deregulation policy per se is not contrary to the
of passion or personal hostility, and must be so patent and so
Constitution.—A close perusal of the assailed Section 19 of
gross as to amount to an evasion of a positive duty or to a
RA 8479 and Section 19 of Article XII of the Constitution does
virtual refusal to perform the duty enjoined or to act at all in
not readily reveal their irreconcilability. Indeed, even petitioner
contemplation of law.” These jurisprudential elements of
admits that the deregulation policy per se is not contrary to the
arbitrariness, despotism, passion and hostility have not been
Constitution. Neither could it be successfully argued that the
shown to exist under the present circumstances.
implementation of such policy within the five-month phase-in
period is per se anathema to
QUISUMBING, J., Concurring Opinion:
Constitutional Law; Court is not called upon to rule on the whose turf we must not tread, under the principle of separation
wisdom of the law or to repeal it or modify it if found of powers. The term “political question” connotes what it
impractical.—Now in the present petition, Garcia insists on his means in ordinary parlance, namely, a question of policy. It
old plea for a return only to partial deregulation of the refers to “those questions which, under the Constitution, are to
downstream oil industry, wherein the main features of be decided by the people in their sovereign capacity, or in
deregulation would be permitted but the retail prices of oil regard to which full discretionary authority has been delegated
products would still be regulated through an Automatic Pricing to the legislative or executive branch of the government.” It is
Mechanism. However, I find his contentions to be lacking legal concerned with issues dependent upon the wisdom, not
basis, even if his proposal appears to be expedient, or even legality, of a particular measure. The judiciary does not directly
beneficial, especially to the poor. As the Court said in Tañada settle policy issues. Under our system of government, policy
vs. Tuvera, “[T]his Court is not called upon to rule on the issues are within the domain of the political branches of
wisdom of the law or to repeal it or modify it if we find it government and of the people themselves as the repository of
impractical. That is not our function. That function belongs to all state powers.
the legislator. Our task is merely to interpret and apply the law
as conceived and approved by the political departments of the Same; Every law has in its favor the presumption of
government in accordance with the prescribed procedure.” constitutionality; Infringement upon constitutional rights must
be proved and established persuasively to invalidate a
221 provision of a law, if not the entire law itself.—Well-
established is the principle that every law has in its favor the
VOL. 321, DECEMBER 17, 1999 221 presumption of constitutionality.To declare a law
Garcia vs. Corona unconstitutional, the repugnancy of that law to the Constitution
must be clear and unequivocal. But we recognize that even if a
law is aimed at the attainment of some public good, still its
Same; A suspension of a valid statute must rest upon legislative provisions cannot infringe upon constitutional rights. That
action, it may not be effected solely by a judicial act; Under infringement, however, must be proved and established
our system of government, policy issues are within the domain persuasively to invalidate a provision of a law, if not the entire
of the political branches of government and of the people law itself.
themselves as the repository of all state powers.—To heed the
petitioner’s prayer, this Court would have to legislate, a power
PETITION to declare Sec. 19 of R.A. No. 8479
granted only to Congress. The operation of a statute may be
unconstitutional.
duly suspended only by authority of the legislature. Indeed, a
suspension of a valid statute must rest upon legislative action;
The facts are stated in the opinion of the Court.
it may not be effected solely by a judicial act. Clearly it is a
policy decision of the legislative and executive departments in
 Brillantes, Navarro, Jumamil, Arcilla, Escolin & Martinez intimately the esse of the law. Thus, the whole statute had to be
Law Offices for petitioner. invalidated.

222 As a result of the Tatad decision, Congress enacted Republic

Act No. 8479, a new deregulation law without the offending
222 SUPREME COURT REPORTS ANNOTATED provisions of the earlier law. Petitioner Enrique T. Garcia, a
Garcia vs. Corona member of Congress, has now brought this petition seeking to
declare Section 19 thereof, which sets the time of full
deregulation, unconstitutional. After failing in his attempts to
Villegas, Maglaya & Associates for Petron Corporation. have Congress incorporate in the law the economic theory he
espouses, petitioner now asks us, in the name of upholding the
Quiason, Makalintal, Barot, Torres & Ibarra for Pilipinas Constitution, to undo a violation which he claims Congress has
Shell Petroleum Corporation. committed.
YNARES-SANTIAGO, J.: The assailed Section 19 of R.A. 8479 states in full:
On November 5, 1997, this Court in Tatad v. Secretary of the ________________
Department of Energy and Lagman, et al. v. Hon. Ruben
Torres, et al.,1 declared Republic Act No. 8180, entitled “An 1
281 SCRA 330 (1997).
Act Deregulating the Downstream Oil Industry and For Other
Purposes,” unconstitutional, and its implementing Executive
223
Order No. 392 void.

R.A. 8180 was struck down as invalid because three key VOL. 321, DECEMBER 17, 1999 223
provisions intended to promote free competition were shown to Garcia vs. Corona
achieve the opposite result. More specifically, this Court ruled
that its provisions on tariff differential, stocking of inventories, SEC. 19. Start of Full Deregulation.—Full deregulation of the
and predatory pricing inhibit fair competition, encourage Industry shall start five (5) months following the effectivity of
monopolistic power, and interfere with the free interaction of this Act: Provided, however, That when the public interest so
the market forces. requires, the President may accelerate the start of full
deregulation upon the recommendation of the DOE and the
While R.A. 8180 contained a separability clause, it was Department of Finance (DOF) when the prices of crude oil and
declared unconstitutional in its entirety since the three (3) petroleum products in the world market are declining and the
offending provisions so permeated the law that they were so value of the peso in relation to the US dollar is stable, taking
into account relevant trends and prospects; Provided, further, because within the short span of five months, the market is still
That the foregoing provision notwithstanding, the five (5)- dominated and controlled by an oligopoly of the three (3)
month Transition Phase shall continue to apply to LPG, regular private respondents, namely, Shell, Caltex and Petron.
gasoline and kerosene as socially-sensitive petroleum products
and said petroleum products shall be covered by the automatic The objective of the petition is deceptively simple. It states that
pricing mechanism during the said period. if the constitutional mandate against monopolies and

Upon the implementation of full deregulation as provided 224

herein, the Transition Phase is deemed terminated and the
following laws are repealed: 224 SUPREME COURT REPORTS ANNOTATED
Garcia vs. Corona
1. a) Republic Act No. 6173, as amended;
2. b) Section 5 of Executive Order No. 172, as amended;
3. c) Letter of Instruction No. 1431, dated October 15, combinations in restraint of trade2 is to be obeyed, there should
1984; be indefinite and open-ended price controls on gasoline and
4. d) Letter of Instruction No. 1441, dated November 20, other oil products for as long as necessary. This will allegedly
1984, as amended; prevent the “Big 3”—Shell, Caltex and Petron—from price-
5. e) Letter of Instruction No. 1460, dated May 9, 1985; fixing and overpricing. Petitioner calls the indefinite retention
6. f) Presidential Decree No. 1889; and of price controls as “partial deregulation.”
7. g) Presidential Decree No. 1956, as amended by
Executive Order No. 137: The grounds relied upon in the petition are:

Provided, however, That in case full deregulation is started by A.

the President in the exercise of the authority provided in this
Section, the foregoing laws shall continue to be in force and SECTION 19 OF R.A. NO. 8479 WHICH PROVIDES FOR
effect with respect to LPG, regular gasoline and kerosene for FULL DEREGULATION FIVE (5) MONTHS OR EARLIER
the rest of the five (5)-month period. FOLLOWING THE EFFECTIVITY OF THE LAW, IS
GLARINGLY PRO-OLIGOPOLY, ANTI-COMPETITION
Petitioner contends that Section 19 of R.A. 8479, which AND ANTI-PEOPLE, AND IS THEREFORE PATENTLY
prescribes the period for the removal of price control on UNCONSTITUTIONAL FOR BEING IN GROSS AND
gasoline and other finished products and for the full CYNICAL CONTRAVENTION OF THE
deregulation of the local downstream oil industry, is patently CONSTITUTIONAL POLICY AND COMMAND
contrary to public interest and therefore unconstitutional EMBODIED IN ARTCLE XII, SECTION 19 OF THE 1987
CONSTITUTION AGAINST MONOPOLIES AND D.
COMBINATIONS IN RESTRAINT OF TRADE.
PREMATURE FULL DEREGULATION UNDER SECTION
B. 19 OF R.A. NO. 8479 MAY AND SHOULD THEREFORE
BE DECLARED NULL AND VOID EVEN AS THE REST
SAID SECTION 19 OF R.A. No. 8479 IS GLARINGLY OF ITS PROVISIONS REMAIN IN FORCE, SUCH AS THE
PROOLIGOPOLY, ANTI-COMPETITION AND ANTI- TRANSITION PHASE OR PARTIAL DEREGULATION
PEOPLE, FOR THE FURTHER REASON THAT IT WITH PRICE CONTROLS THAT ENSURES THE
PALPABLY AND CYNICALLY VIOLATES THE VERY PROTECTION OF THE PUBLIC INTEREST BY
OBJECTIVE AND PURPOSE OF R.A. NO. 8479, WHICH IS PREVENTING THE BIG 3 OLIGOPOLY’S PRICE-FIXING
TO ENSURE A TRULY COMPETITIVE MARKET UNDER AND OVERPRICING.3
A REGIME OF FAIR PRICES.
The issues involved in the deregulation of the downstream oil
C. industry are of paramount significance. The ramifications,
international and local in scope, are complex. The impact on
SAID SECTION 19 OF R.A. No. 8479, BEING GLARINGLY the nation’s economy is pervasive and far-reaching. The
PRO-OLIGOPOLY, ANTI-COMPETITION AND ANTI- amounts involved in the oil business are immense. Fluctuations
PEOPLE, BEING PATENTLY UNCONSTITUTIONAL AND in the supply and price of oil products have a dramatic effect
BEING PALPABLY VIOLATIVE OF THE LAW’S POLICY on economic development and public welfare. As pointed out
AND PURPOSE OF ENSURING A TRULY COMPETITIVE in the Tatad decision, few cases carry a surpassing importance
MARKET UNDER A REGIME OF FAIR PRICES, IS A on the daily life of every Filipino. The issues affect everybody
VERY GRAVE AND GRIEVOUS ABUSE OF DISCRETION from the poorest wage-earners and their families to the richest
ON THE PART OF THE LEGISLATIVE AND EXECUTIVE entrepreneurs, from industrial giants to humble consumers.
BRANCHES OF GOVERNMENT.
Our decision in this case is complicated by the unstable oil
_________________ prices in the world market. Even as this case is pending, the
price of OPEC oil is escalating to record levels. We have to
2 emphasize that our decision has nothing to do with worldwide
CONSTITUTION, Article XII, Section 19.
fluctuations in oil prices and the countermeasures of
225 Government each time a new development takes place.

VOL. 321, DECEMBER 17, 1999 225 The most important part of deregulation is freedom from price
control. Indeed, the free play of market forces through
Garcia vs. Corona
deregulation and when to implement it represent one option to This is so because the Government believes that deregulation
solve the problems of the oil-consuming public. There are other will eventually prevent monopoly. The simplest form of
considerations which may be taken into account such as the monopoly exists when there is only one seller or producer of a
reduction of taxes on oil products, the reinstitution of an Oil product or service for which there are no substitutes. In its
Price Stabilization Fund, the choice between government more complex form, monopoly is defined as the joint
subsidies taken from the regular taxpaying public on one acquisition or maintenance by members of a conspiracy,
formed for that purpose, of the power to control and dominate
________________ trade and commerce in a commodity to such an extent that they
are able, as a group, to exclude actual or potential competitors
3
Rollo, pp. 15-16. from the field, accompanied with the intention and purpose to
exercise such power.4
226
Where two or three or a few companies act in concert to
226 SUPREME COURT REPORTS ANNOTATED control market prices and resultant profits, the monopoly is
Garcia vs. Corona called an oligopoly or cartel. It is a combination in restraint of
trade.
hand and the increased costs being shouldered only by users of The perennial shortage of oil supply in the Philippines is
oil products on the other, and most important, the immediate exacerbated by the further fact that the importation, refining,
repeal of the oil deregulation law as wrong policy. Petitioner and marketing of this precious commodity are in the hands of
wants the setting of prices to be done by Government instead of
being determined by free market forces. His preference is ________________
continued price control with no fixed end in sight. A simple
glance at the factors surrounding the present problems 4
American Tobacco Co. v. United States, 328 U.S. 781; 90 L.
besetting the oil industry shows that they are economic in Ed. 1575.
nature.
227
R.A. 8479, the present deregulation law, was enacted to
implement Article XII, Section 19 of the Constitution which
provides: VOL. 321, DECEMBER 17, 1999 227
Garcia vs. Corona
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.
a cartel, local but made up of foreign-owned corporations. While the Court respects the firm resolve displayed by
Before the start of deregulation, the three private respondents Congress and the President, all departments of Government are
controlled the entire oil industry in the Philippines. equally bound by the sovereign will expressed in the
commands of the Constitution. There is a need for utmost care
It bears reiterating at the outset that the deregulation of the oil
industry is a policy determination of the highest order. It is ________________
unquestionably a priority program of Government. The
Department of Energy Act of 19925 expressly mandates that 5
Republic Act No. 7638.
the development and updating of the existing Philippine energy
program “shall include a policy direction towards deregulation 228
of the power and energy industry.”
228 SUPREME COURT REPORTS ANNOTATED
Be that as it may, we are not concerned with whether or not Garcia vs. Corona
there should be deregulation. This is outside our jurisdiction.
The judgment on the issue is a settled matter and only Congress
can reverse it. Rather, the question that we should address here if this Court is to faithfully discharge its duties as arbitral
is—are the method and the manner chosen by Government to guardian of the Constitution. We cannot encroach on the policy
accomplish its cherished goal offensive to the Constitution? Is functions of the two other great departments of Government.
indefinite price control in the manner proposed by petitioner But neither can we ignore any overstepping of constitutional
the only feasible and legal way to achieve it? limitations. Locating the correct balance between legality and
policy, constitutional boundaries and freedom of action, and
Petitioner has taken upon himself a most challenging task. validity and expedition is this Court’s dilemma as it resolves
Unquestionably, the direction towards which the nation’s the legitimacy of a Government program aimed at giving every
efforts at economic and social upliftment should be addressed Filipino a more secure, fulfilling and abundant life.
is a function of Congress and the President. In the exercise of
this function, Congress and the President have obviously Our ruling in Tatad is categorical that the Constitution’s Article
determined that speedy deregulation is the answer to the XII, Section 19, is anti-trust in history and spirit. It espouses
acknowledged dominion by oligopolistic forces of the oil competition. We have stated that only competition which is fair
industry. Thus, immediately after R.A. 8180 was declared can release the creative forces of the market. We ruled that the
unconstitutional in the Tatad case, Congress took resolute steps principle which underlies the constitutional provision is
to fashion new legislation towards the objective of the earlier competition. Thus:
law. Invoking the Constitution, petitioner now wants to slow
down the process. 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 led the Court to declare R.A. 8180 unconstitutional. The
of trade, the reason for the interdiction of unfair competition, foreign oligopoly or cartel formed by respondents Shell, Caltex
and the reason for regulation of unmitigated monopolies. and Petron, their indulging in price-fixing and overpricing,
Competition is thus the underlying principle of section 19, their blockade tactics which effectively obstructed the entry of
Article XII of our Constitution which cannot be violated by genuine competitors, the dangers posed by the oil cartel to
R.A. No. 8180. We subscribe to the observation of Prof. national security and economic development, and other
Gellhorn that the objective of anti-trust law is “to assure a prevailing sentiments are stated as axiomatic truths. They are
competitive economy, based upon the belief that through repeated in capsulized context as the current background facts
competition producers will strive to satisfy consumer wants at of the present petition.
the lowest price with the sacrifice of the fewest resources.
Competition among producers allows consumers to bid for The empirical existence of this deplorable situation was
goods and services, and thus matches their desires with precisely the reason why Congress enacted the oil deregulation
society’s opportunity costs.” He adds with appropriateness that law. The evils arising from conspiratorial acts of monopoly are
there is a reliance upon “the operation of the ‘market’ system recognized as clear and present. But the enumeration of the
(free enterprise) to decide what shall be produced, how evils by our Tatad decision was not for the purpose of
resources shall be allocated in the production process, and to justifying continued government control, especially price
whom the various products will be distributed. The market control. The objective was, rather, the opposite. The evils were
system relies on the consumer to decide what and how much emphasized to show the need for free competition in a
shall be produced, and on competition, among producers to deregulated industry. And to be sure, the measures to address
determine who will manufacture it.”6 these evils are for Congress to determine, but they have to meet
the test of constitutional validity.
________________
The Court respects the legislative finding that deregulation is
6
Supra, at 358; citing Gellhorn, Anti Trust Law and the policy answer to the problems. It bears stressing that R.A.
Economics in a Nutshell, 1986 ed., p. 45. 8180 was declared invalid not because deregulation is
unconstitutional. The law was struck down because, as crafted,
229 three key provisions plainly encouraged the continued
existence if not the proliferation of the constitutionally
VOL. 321, DECEMBER 17, 1999 229 proscribed evils of monopoly and restraint of trade.
Garcia vs. Corona
In sharp contrast, the present petition lacks a factual foundation
specifically highlighting the need to declare the challenged
In his recital of the antecedent circumstances, petitioner repeats provision unconstitutional. There is a dearth of relevant,
in abbreviated form the factual findings and conclusions which
reliable, and substantial evidence to support petitioner’s theory not squarely sustain petitioner’s novel thesis that there can be
that price control must continue even as Government is trying deregulation without lifting price controls.
its best to get out of regulating the oil industry. The facts of the
petition are, in the main, a general dissertation on the evils of Petitioner may call the industry subject to price controls as
monopoly. deregulated. In enacting the challenged provision, Congress, on
the other hand, has declared that any industry whose prices and
230 profits are fixed by government authority remains a highly
regulated one.
230 SUPREME COURT REPORTS ANNOTATED
Garcia vs. Corona Petitioner, therefore, engages in a legal paradox. He fails to
show how there can be deregulation while retaining
government price control. Deregulation means the lifting of
Petitioner overlooks the fact that Congress enacted the
control, governance and direction through rule or regulation. It
deregulation law exactly because of the monopoly evils he
means that the regulated industry is freed from the controls,
mentions in his petition. Congress instituted the lifting of price
guidance, and restrictions to which it used to be subjected. The
controls in the belief that free and fair competition was the best
use of the word “partial” to qualify deregulation is sugar-
remedy against monopoly power. In other words, petitioner’s
coating. Petitioner is really against deregulation at this time.
facts are also the reasons why Congress lifted price controls
and why the President accelerated the process. The facts
Petitioner states that price control is good. He claims that it was
adduced in favor of continued and indefinite price control are
the regulation of the importation of finished oil prod-
the same facts which supported what Congress believes is an
exercise of wisdom and discretion when it chose the path of
231
speedy deregulation and rejected Congressman Garcia’s
economic theory.
VOL. 321, DECEMBER 17, 1999 231
The petition states that it is using the very thoughts and words Garcia vs. Corona
of the Court in its Tatad decision. Those thoughts and words,
however, were directed against the tariff differential, the ucts which led to the exit of competitors and the consolidation
inventory requirement, and predatory pricing, not against and dominion of the market by an oligopoly, not price control.
deregulation as a policy and not against the lifting of price Congress and the President think otherwise.
controls.
The argument that price control is not the villain in the
A dramatic, at times expansive and grandiloquent, reiteration intrusion and growth of monopoly appears to be pure theory
of the same background circumstances narrated in Tatad does not validated by experience. There can be no denying the fact
that the evils mentioned in the petition arose while there was legislative policy and replace it with petitioner’s own
price control. The dominance of the so-called “Big 3” became legislative program.
entrenched during the regime of price control. More
importantly, the ascertainment of the cause and the method of 232
dismantling the oligopoly thus created are a matter of
legislative and ex-ecutive choice. The judicial process is 232 SUPREME COURT REPORTS ANNOTATED
equipped to handle legality but not wisdom of choice and the Garcia vs. Corona
efficacy of solutions.
The factual allegations of the intervenors have not been refuted
Petitioner engages in another contradiction when he puts
and we see no reason to doubt them. Their argument that the
forward what he calls a self-evident truth. He states that a truly
co-existence of many viable rivals create free market
competitive market and fair prices cannot be legislated into
conditions induces competition in product quality and
existence. However, the truly competitive market is not being
performance and makes available to consumers an expanded
created or fashioned by the challenged legislation. The market
range of choices cannot be seriously disputed.
is simply freed from legislative controls and allowed to grow
and develop free from government interference. R.A. 8479
actually allows the free play of supply and demand to dictate On the other hand, the pleadings of public and private
prices. Petitioner wants a government official or board to respondents both put forth the argument that the challenged
continue performing this task. Indefinite and open-ended price provision is a policy decision of Congress and that the wisdom
control as advocated by petitioner would be to continue a of the provision is outside the authority of this Court to
regime of legislated regulation where free competition cannot consider. We agree. As we have ruled in Morfe v. Mutuc:7
possibly flourish. Control is the antithesis of competition. To
grant the petition would mean that the Government is not keen (I)t is well to remember that this Court, in the language of
on allowing a free market to develop. Petitioner’s “self-evident Justice Laurel, “does not pass upon question or wisdom, justice
truth” thus supports the validity of the provision of law he or expediency of legislation.” As expressed by Justice Tuason:
opposes. “It is not the province of the courts to supervise legislation and
keep it within the bounds of propriety and common sense. That
New players in the oil industry intervened in this case. is primarily and exclusively a legislative concern.” There can
According to them, it is the free market policy and atmosphere be no possible objection then to the observation of Justice
of deregulation which attracted and brought the new Montemayor: “As long as laws do not violate any
participants, themselves included, into the market. The Constitutional provision, the Courts merely interpret and apply
intervenors express their fear that this Court would overrule them regardless of whether or not they are wise or salutary.”
For they, according to Justice Labrador, “are not supposed to
override legitimate policy and x x x never inquire into the Resolution dated December 3, 1997, which has long become
wisdom of the law.” final and executory, we stated:

It is thus settled, to paraphrase Chief Justice Concepcion in We shall first resolve petitioner Garcia’s linchpin contention
Gonzales v. Commission on Elections, that only congressional that the full deregulation decreed by R.A. No. 8180 to start at
power or competence, not the wisdom of the action taken, may the end of March 1997 is unconstitutional. For prescinding
be the basis for declaring a statute invalid. This is as it ought to from this premise, petitioner suggests that “we simply go back
be: The principle of separation of powers has in the main to the transition period, price control will be revived through
wisely allocated the respective authority of each department the automatic pricing mechanism based on Singapore Posted
and confined its jurisdiction to such a sphere. There would then Prices. The Energy Regulatory Board x x x would play a
be intrusion not allowable under the Constitution if on a matter limited and ministerial role of computing the monthly price
left to the discretion of a coordinate branch, the judiciary would ceiling of each and every petroleum fuel product, using the
substitute its own. If there be adherence to the rule of law, as automatic pricing formula. While the OPSF would return, this
there ought to be, the last offender should be the courts of coverage would be limited to monthly price increases in excess
justice, to which rightly litigants submit their controversy of P0.50 per liter.”
precisely to maintain unimpaired the supremacy of legal norms
and prescriptions. The attack on the validity of the challenged We are not impressed by petitioner Garcia’s submission.
provision likewise insofar as there may be objections, even if Petitioner has no basis in condemning as unconstitutional per
valid and cogent, on its wisdom cannot be sustained. se the date fixed by Congress for the beginning of the full
deregulation of the downstream oil industry. Our Decision
________________ merely faulted the Executive for factoring the depletion of
OPSF in advancing the date of full deregulation to February
7
22 SCRA 424, at 450-51 (1968); citations omitted. 1997. Nonetheless, the error of the Executive is now a non-
issue for the full deregulation set by Congress itself at the end
233 of March 1997 has already come to pass. March 1997 is not an
arbitrary date. By that date, the transition period has ended and
VOL. 321, DECEMBER 17, 1999 233 it was expected that the people would have adjusted to the role
Garcia vs. Corona of market forces in shaping the prices of petroleum and its
products. The choice of March 1997 as the date of full
deregulation is a judgment of Congress and its judgment call
In this petition, Congressman Garcia seeks to revive the long cannot be impugned by this Court.8
settled issue of the timeliness of full deregulation, which issue
he had earlier submitted to this Court by way of a Partial
Motion for Reconsideration in the Tatad case. In our
Reduced to its basic arguments, it can be seen that the Petitioner argues further that the public interest requires price
challenge in this petition is not against the legality of controls while the oligopoly exists, for that is the only way the
deregulation. Petitioner does not expressly challenge public can be protected from monopoly or oligopoly pricing.
deregulation. The issue, quite simply, is the timeliness or the But is indefinite price control the only feasible and legal way to
wisdom of the date when full deregulation should be effective. enforce the constitutional mandate against oligopolies?

________________ Article 186 of the Revised Penal Code, as amended, punishes

as a felony the creation of monopolies and combinations in
8
Tatad v. Secretary of the Department of Energy, 282 SCRA restraint of trade. The Solicitor General, on the other hand,
337, 353 (1997). cites provisions of R.A. 8479 intended to prevent competition
from being corrupted or manipulated. Section 11, entitled
234 “Anti-Trust Safeguards,” defines and prohibits cartelization
and predatory pricing. It penalizes the persons and officers
234 SUPREME COURT REPORTS ANNOTATED involved with imprisonment of three (3) to seven (7) years and
Garcia vs. Corona fines ranging from One million to Two million pesos. For this
purpose, a Joint Task Force from the Department of Energy
and Department of Justice is created under Section 14 to
In this regard, what constitutes reasonable time is not for investigate and order the prosecution of violations.
judicial determination. Reasonable time involves the appraisal
of a great variety of relevant conditions, political, social and Sections 8 and 9 of the Act, meanwhile, direct the Departments
economic. They are not within the appropriate range of of Foreign Affairs, Trade and Industry, and Energy to
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.9
9
Coleman v. Miller, 307 U.S. 433; 59 S. Ct. 972; 83 L. Ed.
We repeat that what petitioner decries as unsuccessful is not a 1385 (1939).
final result. It is only a beginning. The Court is not inclined to
stifle deregulation as enacted by Congress from its very start.
235
We leave alone the program of deregulation at this stage.
Reasonable time will prove the wisdom or folly of the
deregulation program for which Congress and not the Court is VOL. 321, DECEMBER 17, 1999 235
accountable. Garcia vs. Corona
undertake strategies, incentives and benefits, including Constitution or a law appears to have been violated. There is no
international information campaigns, tax holidays and various showing of a constitutional violation in this case.
other agreements and utilizations, to invite and encourage the
entry of new participants. Section 6 provides for uniform tariffs WHEREFORE, the petition is DISMISSED.
at three percent (3%).
SO ORDERED.
Section 13 of the Act provides for “Remedies,” under which
the filing of actions by government prosecutors and the Bellosillo, Melo, Puno, Kapunan, Mendoza, Quisumbing,
investigation of private complaints by the Task Force is Purisima, Pardo, Buena and De Leon, Jr., JJ., concur.
provided. Sections 14 and 15 provide how the Department of
Energy shall monitor and prevent the occurrence of collusive 236
pricing in the industry.
236 SUPREME COURT REPORTS ANNOTATED
It can be seen, therefore, that instead of the price controls Garcia vs. Corona
advocated by the petitioner, Congress has enacted anti-trust
measures which it believes will promote free and fair
competition. Upon the other hand, the disciplined, determined, Davide, Jr. (C.J.), In the result; I also join Mr. Justice
consistent and faithful execution of the law is the function of Panganiban in his Separate Opinion.
the President. As stated by public respondents, the remedy
against unreasonable price increases is not the nullification of Vitug, J., In the result.
Section 19 of R.A. 8479 but the setting into motion of its
various other provisions. Panganiban, J., Please see Separate Opinion.

For this Court to declare unconstitutional the key provision Gonzaga-Reyes, J., No part; Spouse with counsel for
around which the law’s anti-trust measures are clustered would intervenor.
mean a constitutionally interdicted distrust of the wisdom of
Congress and of the determined exercise of executive power. SEPARATE OPINION
Having decided that deregulation is the policy to follow, PANGANIBAN, J.:
Congress and the President have the duty to set up the proper
and effective machinery to ensure that it works. This is In essence, deregulation shifts the burden of price control from
something which cannot be adjudicated into existence. This the government to the “market forces” in order (1) to eliminate
Court is only an umpire of last resort whenever the government intervention that may “do more harm than good”1
and (2) to achieve a truly competitive market of fair prices.2 It virtually erased by these schemes, as goods and services are
is also aimed at removing government abuse and corruption in exchanged across borders unhampered by traditional tariffs,
price-setting. At bottom, deregulation is supposed to provide taxes, currency controls, quantitative restrictions and other
the best goods and services at the cheapest prices. protective barriers. Thus, states and governments tend to
surrender some of their authorities and powers to the “market”
The policy, however, is not an infallible cure to abuse, for the and to the renewed energy of laissez faire, such that the threats
evil sought to be avoided may well pass on to the market to civil liberties and human rights, including economic rights,
players, particularly when they combine to restrain trade or may shift from government abuses to the more bedeviling
engage in unfair competition. In the words of Prof. Romulo L. market forces that transcend boundaries and sovereignties. In
Neri of the Asian Institute of Management, “[t]he market is developing countries more than in developed ones, such threats
motivated by price and profits (and sadly, not by moral values are real and ever present.
[or public interest]). The market does not automatically supply
those who need (no matter how badly they need it) but only Judicial Review
those who have the money to buy.”3 to Check Abuses
The buzz words of the third millennium are “deregulation,” This is where the power of judicial review comes in—to
“globalization” and “liberalization.” Territorial frontiers are examine the legal effects of these new economic paradigms
and, in the present controversy, to check whether the present
________________ Oil Deregulation Law (RA 8479) restrains rather than promotes
free trade, in contravention of the Constitution. True, the
1
See public respondent’s Memorandum, p. 19, citing President and Congress, not this Court, have the power and the
Samuelson and Nordhaus, Economics, 1992 ed., p. 341. prerogative to determine whether to adopt such market policies
and, if so, under what conditions and circumstances. However,
2
§2, RA 8479. all such policies and their ramifications must conform to the
Constitution. Otherwise, this Court has the duty to strike them
3
Neri, Economics and Public Policy, 1999 ed., p. 23. down, not because they are unwise or inconvenient, but
Parentheses in original but brackets supplied. because they are constitutionally impermissible.

237 Doctrinally, policies and acts of the political departments of

government may be voided by this Court on either of two
VOL. 321, DECEMBER 17, 1999 237 grounds—infringement of the Constitution or grave abuse of
Garcia vs. Corona discretion.4 An infringement may be proven by demonstrating
that the words of the law directly contradict a provision of the
fundamental law, or by presenting proof that the law authorizes indefinitely while awaiting the advent of “real” competition in
or enables the respondents to violate the Constitution. the market.

________________ Petitioner contends that the three largest oil companies (the
“Big Three”) comprise an oligopoly of the downstream oil
4
Tañada v. Angara, 272 SCRA 18, May 2, 1997; Tatad v. industry. Oligopolies, he claims, “negate free market
Secretary of the Department of Energy, infra; Santiago v. competition and fair prices.” He submits that “regulation
Guingona, Jr., GR No. 134577, November 18, 1998, 298 through price control x x x is patently required by the public
SCRA 756. interest [and] the failure to regulate the oligopoly through price
control is patently inimical to the national interest and patently
238 negates, circumvents and contravenes Section 19, Article XII
of the Constitution.”
238 SUPREME COURT REPORTS ANNOTATED
Garcia vs. Corona ________________
5
“Sec. 19. Start of Full Deregulation.—Full deregulation of
Petitioner Garcia’s Thesis on the [Downstream Oil] Industry shall start five (5) months
Unconstitutionality Concerns Policy following the effectivity of this Act: Provided, however, That
when the public interest so requires, the President may
Having set down the doctrinal legal parameters, let me now accelerate the start of full deregulation upon the
discuss the petitioner’s thesis. Petitioner Enrique T. Garcia recommendation of the DOE and the Department of Finance
anchors his position on the alleged unconstitutionality of (DOF) when the prices of crude oil and petroleum products in
Section 19 of RA 8479,5 which sets the full deregulation of the the world market are declining and the value of the peso in
oil industry five months from the effectivity of the law, on the relation to the US dollar is stable, taking into account relevant
argument that said provision directly violates Section 19, trends and prospects x x x.”
Article XII of the Constitution, which reads as follows:
239
“Sec. 19. The State shall regulate or prohibit monopolies when
the public interest so requires. No combinations in restraint of VOL. 321, DECEMBER 17, 1999 239
trade or unfair competition shall be allowed.”
Garcia vs. Corona
He maintains that once Section 19 of RA 8479 is struck down,
the government will be able to fix and lower petroleum prices
In Tatad v. Secretary of the Department of Energy,6 this Court and perpetuates a cartel, an oligopoly” because of the
defined a monopoly and a combination in restraint of trade as aforecited three provisions, and because petitioners therein
follows: demonstrated to the Court “that the Big Three oil companies
were producing and processing almost identical products which
“A monopoly is a privilege or peculiar advantage vested in one they were selling to the general public at identical prices. When
or more persons or companies, consisting in the exclusive right one company adjusted its prices upwards or
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
6
one or only a few firms dominate the total sales of a product or 281 SCRA 330, 355; November 5, 1997; per Puno, J.
service. On the other hand, a combination in restraint of trade is
an agreement or understanding between two or more persons, 240
in the form of a contract, trust, pool, holding company, or other
form of association, for the purpose of unduly restricting 240 SUPREME COURT REPORTS ANNOTATED
competition, monopolizing trade and commerce in a certain Garcia vs. Corona
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, downwards, the other two followed suit at the same time and
while monopoly refers to the end.” by the same amount.”7

In that case, RA 8180, the predecessor of RA 8479, was struck In his present Petition, petitioner persistently alleges that “[i]t
down by this Court for being contrary to Section 19, Article is self-evident truth that public interest requires the prevention
XII of the Constitution. We took this action because we found of monopolistic/oligopolistic pricing x x x,” and that such
that its provisions on (1) tariff differential, (2) minimum “monopolistic/oligopolistic pricing may be prevented only
inventory and (3) predatory pricing “inhibit fair competition, through price control during the regime of monopoly/oligopoly
encourage monopolistic power and interfere with the free or through a truly competitive market under a regime of fair
interaction of market forces.” We concluded, “The aftermath of prices.” In support of his allegations, he cites “self-evident
R.A. No. 8180 is a deregulated market where competition can truths [which] have x x x been officially recognized and
be corrupted and where market forces can be manipulated by implemented during more than 20 years of price control before
oligopolies.” the passage of the two oil deregulation laws” and which “have
also been recognized and upheld by no less than the Supreme
In my Concurring Opinion in Tatad, I labeled RA 8180 as “a Court En Banc in the Tatad and Lagman cases x x x.” He
pseudo deregulation law which in reality restrains free trade contends that “the Big 3 remain as strong and dominant as
ever.”
In other words, petitioner believes that there is no valid reason and substantial proof that said policy and its concomitant
to lift price control at this time when allegedly there still exists variations are violative of the Constitution or are made by those
an oligopoly in the industry. He proposes instead that agencies in grave abuse of their discretion.
government control should stand for an indefinite period until
the new players are able to capture a substantial part of the The Legal Issue Is Whether Petitioner
market. Has Submitted Sufficient Proof That the
Big Three Have Violated the Constitution
Unfortunately, however, the foregoing thematic statements and
economic theory of Petitioner Garcia are policy in nature and To be more specific, the pivotal issue before this Court is not
are arguments supporting the wisdom of interim government whether it is wiser and more beneficial to empower the
price control. Indeed, “self-evident truths,” economic theories, government to fix fuel prices; rather, it is whether petitioner
deeply-held beliefs, speculative assumptions and has submitted enough factual bases to justify the legal
generalizations may be the bases of legislative and executive conclusion that the Big Three—Petron, Shell and Caltex—have
actions, but they cannot be substitutes for evidence and legal combined themselves “in restraint of trade or [to cause] unfair
arguments in a judicial proceeding. Considered judgment calls competition,” to such an extent as to legally justify a striking
of the legislative and the executive departments are the issues down of Section 19 of RA 8479. The task of proving this issue
of whether the country should adopt the policy of complete or is not easy; in fact, it is formidable and daunting. This is
partial deregulation, and when such policy should take effect because laws are prima facie presumed constitutional and,
and over what products or services. These issues come within unless clearly shown to be infirm, they will always be upheld.8
judicial determination only when there is clear So, too, regularity in the performance of official functions is
the postulate, and any allegation of grave abuse or irregularity
________________ must be proven cogently.
7
This quote is taken from a comment I made in Battles in the
Deregulation per se Is
Supreme Court, 1998 ed., p. 121.
Not Constitutionally Infirm
241
A close perusal of the assailed Section 19 of RA 8479 and
Section 19 of Article XII of the Constitution does not readily
VOL. 321, DECEMBER 17, 1999 241
reveal their irreconcilability. Indeed, even petitioner admits that
Garcia vs. Corona the deregulation policy per se is not contrary to the
Constitution. Neither could it be successfully argued that the
implementation of such policy within the five-month phase-in
period is per se anathema to our fundamental law. It is his
imperative task therefore to adduce before the Court factual Petitioner merely resurrects and relies heavily on the
and legal bases to demonstrate clearly and cogently the un- arguments, the statistics and the proofs he submitted two years
ago in the first oil deregulation case, Tatad v. Secretary of the
________________ Department of Energy. Needless to state, those reasons were
taken into consideration in said case, and they indeed helped
8
Lim v. Pacquing, 240 SCRA 649, January 27, 1995; Tano v. show the unconstitutionality of RA 8180. But exactly the same
Socrates, 278 SCRA 154, 1997; Tan v. People, 290 SCRA 117, old grounds cannot continue to support petitioner’s present
May 19, 1998. allegation that the major oil companies—Petron, Shell and
Caltex—persist to this date in their oligopolistic practices, as a
242 consequence of the current Oil Deregulation Law and in
violation of the Constitution. In brief, the legal cause and effect
242 SUPREME COURT REPORTS ANNOTATED relationship has not been amply shown.
Garcia vs. Corona
Petitioner Has Not Proven
constitutionality of the acts of Congress and the President in Arbitrariness or Despotism
adopting and implementing full deregulation of petroleum
prices at this time. Petitioner harps at the five-month period of transition from
price control to full deregulation provided under Section 19 of
In this context, I have pored over the records of this case and RA 8479. He claims that such short period is not enough to
searched long and wide for such factual and legal bases but, ensure a “truly competitive market” in the supposed oligopoly
other than presumptions and generalizations that are of the oil industry. Again, his statement is not backed up by
unsupported by hard evidence, I could not find any. Petitioner
fails to substantiate his allegations that the three oil giants have 243
engaged, directly or indirectly, in an unholy alliance to fix
prices and restrain trade. VOL. 321, DECEMBER 17, 1999 243
Garcia vs. Corona
True, retail prices of petroleum products have been increased,
to the consternation of the public, but petitioner has not shown evidentiary basis. He offers no substantial proof that Congress,
by specific fact or clear proof how the questioned provision of in deciding to lift price controls five months from the
RA 8479 has been used to transgress the Constitution. He has effectivity of RA 8475, gravely abused its discretion. To
not demonstrated that the Big Three arbitrarily dictate and repeat, it is not within the province of the judiciary to
corrupt the price of oil in a manner violative of the determine whether five months is indeed short and, for that
Constitution.
matter, what length of time is adequate. That is a matter of SCRA 410, November 5, 1992; Bustamante v. Commissioner
legislation addressed to the discretion of our policy makers. on Audit, 216 SCRA 134, 136, November 27, 1992.

It is basic to our form of government that the Court cannot 244

inquire into the wisdom or expediency of the acts of the
executive or the legislative department, unless there is a clear 244 SUPREME COURT REPORTS ANNOTATED
showing of constitutional infirmity or grave abuse of discretion Garcia vs. Corona
amounting to lack or excess of jurisdiction.9 “By grave abuse
of discretion is meant such capricious and whimsical exercise
of judgment as is equivalent to lack of jurisdiction. Mere abuse Market Share of New Players
of discretion is not enough. It must be grave abuse of Has Increased Under RA 8479
discretion, as when the power is exercised in an arbitrary or
despotic manner by reason of passion or personal hostility, and Historically, deregulation as a policy in the downstream oil
must be so patent and so gross as to amount to an evasion of a industry was begun in 1996 when new players started to set up
positive duty or to a virtual refusal to perform the duty enjoined and operate their businesses in the country. That was
or to act at all in contemplation of law.”10 These jurisprudential practically a full three years of operations, the last two of
elements of arbitrariness, despotism, passion and hostility have which saw no significant barriers in terms of tariff differential,
not been shown to exist under the present circumstances. minimum inventory or predatory pricing.

________________ Obviously, the conditions prevailing when the Court struck

down RA 8180 two years ago have not been proven to be
9
Tañada v. Angara, supra; Santiago v. Guingona, Jr., supra. prevalent at present. In 1996, the new players had a market
See also Garcia v. Comelec, 227 SCRA 100, October 5, 1993; share of barely one percent.11 The new players have since
Tañada v. Cuenco, 103 Phil. 1051, February 28, 1957; expanded or increased in number (46 as of June 30, 1999), and
Magtajas v. Pryce Properties Corp., 223 SCRA 255, July 20, they now have about nine percent share of the market.12
1994. Significantly, these new players have intervened in this case in
defense of the law. These are the little Davids who claim that
10
Tañada v. Angara, supra, citing Zarate v. Olegario, 260 with RA 8479 as their slingshot, they can, given enough time,
SCRA 1; October 7, 1996; San Sebastian College v. Court of fight and win against the three erstwhile unbeatable Goliaths.
Appeals, 197 SCRA 138, 144, May 15, 1991; Commissioner of Indeed, they believe that the questioned provision has given
Internal Revenue v. Court of Tax Appeals, 195 SCRA 444, 458, them the impetus to compete and thereby eventually show the
March 20, 1991; Simon v. Civil Service Commission, 215 benefits of deregulation; namely, the best products at the
cheapest prices.
With this factual backdrop and in the dire absence of contrary In sum I make no secret of my sympathy for petitioner’s
proof, it would be specious to conclude that under the aegis of frustration at the inability of our government to arrest the
Section 19 of RA 8479, the Big Three have restrained trade or spiraling cost of fuel and energy.13 I hear the cry of the poor
unduly restricted competition. that life has become more miserable day by day. I feel their
anguish, pain and seeming hopelessness in securing their
Moreover, the three provisions in RA 8180 which were material needs.
adjudged abhorrent to the fundamental principles of free
enterprise are no longer found in RA 8479. The depletion of However, the power to lower petroleum prices through the
the Oil Price Stabilization Fund, the extraneous factor that was adoption or the rejection of viable economic policies or
considered by the President in accelerating the implementation theories does not lie in the Court or its members. Furthermore,
of full deregulation under RA 8180, was no longer taken into absent sufficient factual evidence and legal moorings, I cannot
account in the present milieu. The Court’s reasons for declaring vote to declare a law or any provision thereof to be
the unconstitutionality of RA 8180 are, therefore, not unconstitutional simply because, theoretically, such action may
appear to be wise or beneficial or practical. Neither can I
________________ attribute grave abuse of discretion to another branch of
government without an adequate showing of patent
11
Solicitor general’s Memorandum, p. 44. arbitrariness, whim or caprice. Should I do so, I myself will be
gravely abusing my discretion, the very evil that petitioner
12 attributes to the legislature.
Ibid.

245 WHEREFORE, I vote to DISMISS the Petition.

VOL. 321, DECEMBER 17, 1999 245 ________________

Garcia vs. Corona 13
During the Oral Argument on July 13, 1999, I compared
petitioner to a Don Quixote bravely battling petroleum-
germane to the validity of RA 8479. The petitioner cannot rely powered windmills. If only for his gutsy Quixotic quest, I have,
on the same rationale for the purpose of successfully assailing like many members of the Court, lent a sympathetic ear to
RA 8479. Indeed, he admits that “the Tatad and Lagman cases petitioner, not only in this case but also in the earlier Tatad in
x x x did not consider and adjudicate on the lifting of price which I wrote a Concurring Opinion to the Court’s Decision
control per se, under RA 8180, as an issue.” striking down RA 8180, the Oil Deregulation Law then.
Epilogue 246
246 SUPREME COURT REPORTS ANNOTATED 8180, the first oil industry deregulation law, otherwise known
Garcia vs. Corona as the “Downstream Oil Industry Deregulation Act of 1996.”

In a banc decision promulgated on November 5, 1997, the

CONCURRING OPINION Court declared R.A. 8180 unconstitutional for having
transgressed the constitutional prohibition against monopolies
QUISUMBING, J.: and combinations in restraint of trade, specifically mandated in
Section 19, Article XII of the Constitution. Consequently,
I fully concur in the ponencia of Justice Consuelo Ynares- Executive Order No. 392 (E.O. 392) implementing the provi-
Santiago. What I would like to stress here and now is that,
contrary to certain ill-informed comments in media, ________________
petitioner’s pleadings were thoroughly dissected at the hearing
1
where he and his counsel as well as the respondents amply Rollo, pp. 40-47.
presented their arguments. Questions of law and policy were
also illuminated from different perspectives in sessions and in 247
memoranda internally exchanged by members of the Court.
Right away, it must be added, no delay attended the resolution VOL. 321, DECEMBER 17, 1999 247
of this petition. For while the Constitution allows two years, Garcia vs. Corona
this case was decided en banc in less than half that period, from
the time of submission of the parties’ memoranda. Below is a
sion of said law was voided. On December 3, 1997, the
full presentation of my view on the controversy generated by
motions for reconsideration were denied for utter lack of merit.
petitioner’s insistence that the Court overturn an act passed by
his own branch of government and approved by the Chief
Now before us is a challenge to the second oil industry
Executive.
deregulation law, R.A. 8479. The relevant factual and
procedural antecedents of the present petition are as follows:
At issue in this special civil action for certiorari under Rule 65
is the constitutionality of Sec. 19 of Republic Act No. 8479,1
In 1992, the Philippine government welcomed more liberal
entitled “An Act Deregulating the Downstream Oil Industry
economic policies and started the ground work for privatization
and for other Purposes.” The law was enacted pursuant to the
of some government-owned or controlled corporations and
policy of the State to liberalize and deregulate the downstream
deregulation of the oil industry. In due time, Congress enacted
oil industry. R.A. 8479 is the remedial legislation passed by
Congress to cure the infirmities found in Republic Act No. Republic Act No. 7638 on December 9, 1992. It created the
Department of Energy (DOE). Among others, it was tasked, at
the end of four years from the effectivity of R.A. No. 7638 and
upon approval of the President, to institute the “programs and Garcia vs. Corona
the timetable for the deregulation of appropriate projects and
activities of the energy industry.”2 The challenged provisions in R.A. 8180 were:
Following the intent of R.A. 7638, the Philippine National Oil (1) the provision on tariff differential found in Section 5 (b)
Company (PNOC) sold 40% of its equity in Petron Corporation which states:
to the Aramco Overseas Company.
“Section 5 (b)—Any law to the contrary notwithstanding and
Sometime in March 1996, Congress made that daring step starting with the effectivity of this Act, tariff duty shall be
towards the realization of liberating the oil industry from imposed and collected on imported crude oil at the rate of three
government regulation and enacted R.A. 8180. On February 8, percent (3%) and imported refined petroleum products at the
1997, President Fidel V. Ramos issued E.O. 392, which rate of seven percent (7%), except fuel oil and LPG, the rate for
signaled the implementation or start of deregulafion in the oil which shall be the same as that for imported crude oil:
industry. Provided, that beginning on January 1, 2004 the tariff rate on
imported crude oil and refined petroleum products shall be the
Senator Francisco Tatad and Congressmen Enrique Garcia, same. Provided, further, That this provision may be amended
Edcel Lagman, Joker Arroyo and Wigberto Tañada, among only by an Act of Congress.”
others, filed separate petitions docketed as G.R. Nos. 124360
and 127867, before the Court. The petitioners contended that (2) the minimum inventory clause, in Section 6 which
some of the provisions of R.A. No. 8180 violated Section 19 of provides:
Article XII of the 1987 Constitution, which states:
“Section 6—To ensure the security and continuity of petroleum
“The State shall regulate or prohibit monopolies when the crude and products supply, the DOE shall require the refiners
public interest so requires. No combinations in restraint of and importers to maintain a minimum inventory equivalent to
trade or unfair competition shall be allowed.” ten percent (10%) of their respective annual sales volume or
forty (40) days of supply, whichever is lower.”
________________
2
(3) the predatory pricing scheme in Section 9:
Section 5[b] of R.A. 7638.
“Section 9—To ensure fair competition and prevent cartels and
248 monopolies in the downstream oil industry, the following acts
shall be prohibited:
248 SUPREME COURT REPORTS ANNOTATED
xxx “Finally, we come to the provision on predatory pricing which
is defined as ‘. . . selling or offering to sell any product at a
“(b) Predatory pricing which means selling or offering to sell price unreasonably below the industry average cost so as to
any product at a price unreasonably below the industry average attract customers to the detriment of competitors.’ . . . The ban
cost so as to attract customers to the detriment of competitors.” on predatory pricing cannot be analyzed in isolation. Its
validity is interlocked with the barriers imposed by R.A. No.
In declaring provisions of R.A. 8180 unconstitutional, the 8180 on the entry of new players.”3
Court held:
That decision came under sharp attack by critics who accused
“. . . Petron, Shell and Caltex stand as the only major league the Court of improvidently intervening in the economic affairs
players in the oil market. The tariff differential of 4% therefore of the State. Economists and businessmen remarked that the
works to their immense benefit. . . . New players that intend to decision was a major blow to economic reforms and an
equalize the market power of Petron, Shell and Caltex by additional burden to the government’s already huge budget
building refineries of their own will have to spend billions of deficit as it would require reinstating a subsidy on oil
pesos. Those products.4 Pertinent portions of the Decision decreed:

249 “With this Decision, some circles will chide the Court for
interfering with an economic decision of Congress. Such
VOL. 321, DECEMBER 17, 1999 249 criticism is charmless for the Court is annulling R.A. No. 8180
Garcia vs. Corona not because it disagrees with deregulation as an economic
policy but because as cobbled by Congress in its present form,
the law violates the Constitution. The right call therefor should
who will not build refineries but compete with them will suffer be for Congress to write a new oil deregulation law that
the huge disadvantage of increasing their product cost by 4%. conforms with the Constitution and not for this Court to shirk
They will be competing on an uneven field. its duty of striking down a law that offends the Constitution. . .
. Indeed when confronted by a law violating the Constitution,
“The provision on inventory widens the balance of advantage the Court has no option but to strike it down dead . . . Hence,
of Petron, Shell and Caltex against prospective new players. for as long as the Constitution reigns supreme so long will this
Petron, Shell and Caltex can easily comply with the inventory Court be vigilant in upholding the economic rights of our
requirement of R.A. No. 8180 in view of their existing storage people
facilities. Prospective competitors again will find compliance
with this requirement difficult as it will entail a prohibitive cost ________________
....
3
Tatad vs. Secretary of the Department of Energy, 281 SCRA questioned provisions cannot be struck down alone, for they
330, 359-360 (1997). were the ones intended to carry out the policy of the law as
embodied in Section 2.6
4
See Philippine Star issue of Dec. 4, 1997.
On the question of the validity of E.O. 392, the Court held that
250 the Executive Department failed to follow faithfully the
standards set by R.A. 8180 when it considered the extraneous
250 SUPREME COURT REPORTS ANNOTATED factor of depletion of the Oil Price Stabilization Fund (OPSF)
Garcia vs. Corona fund, instead of limiting the basis for the acceleration of full
deregulation of the industry to only two factors, viz.: (1) the
time when the prices of crude oil and petroleum products in the
especially from the onslaught of the powerful. Our defense of world market are declining, and (2) the time when the
the people’s economic rights may appear heartless because it exchange rate of the peso in relation to the US dollar is sta-
cannot be half-hearted.
________________
IN VIEW WHEREOF, the petitions are granted. R.A. No. 8180
is declared unconstitutional and E.O. No. 372 [392] void.”5 5
Supra, note 3 at 370.
Public respondents filed their consolidated motion for 6
Tatad vs. Secretary of the Department of Energy, 282 SCRA
reconsideration. Some of the new players, in the industry: 337, 354 (1997).
Eastern Petroleum Corp., Seaoil Petroleum Corp., Subic Bay
Distribution, Inc., TWA, Inc., and Dubphil Gas moved to
251
intervene and aired their stand against the total nullification of
R.A. 8180. They also averred that they were in favor of
declaring the three offensive provisions unconstitutional. VOL. 321, DECEMBER 17, 1999 251
Petitioner Enrique T. Garcia, likewise, filed a partial motion for Garcia vs. Corona
reconsideration and pushed for a return only to partial
deregulation in which the main features of deregulation would ble.7 By considering another factor, the Executive Department
be allowed free reign, but the retail price of oil products would rewrote the standards set forth in R.A. 8180.8 In light of the
still be regulated through the Energy Regulatory Board. uncertainty of the consideration given by the Executive
department to the depletion of the OPSF fund for the full
The Court found no merit in the motion for reconsideration, deregulation of the oil industry, we ruled that E.O. 392
motion for intervention, and partial motion for reconsideration. constituted a misapplication of R.A. 8180. In sum, the
Despite the separability clause, the Court ruled that the three
implementing order was found void, while the basic law was ________________
held unconstitutional.
7
Supra, note 3, at 353.
On reconsideration, our December 3, 1997 Resolution stressed
8
that R.A. 8180 is unconstitutional because (1) it gave more Ibid.
power to an already powerful oil oligopoly; (2) it blocked the
9
entry of effective competitors; and (3) it will sire an even more Supra, note 6, at 358.
powerful oligopoly whose unchecked power will prejudice the
interest of the consumers and compromise the general welfare.9 252
The Court reiterated, however, that there was no impediment in
re-enacting R.A. 8180 minus the provisions which are anti- 252 SUPREME COURT REPORTS ANNOTATED
competition. Garcia vs. Corona
Consequently, Congress fast-tracked a new oil deregulation
law, R.A. 8479, which was approved and duly signed on upholding the economic rights of our people, we truly hoped
February, 10, 1998. It took effect on February 12, 1998 upon that Congress would address the defects of R.A. 8180 and not
the completion of its publication in a newspaper of general reenact R.A. 8180 through the guise of R.A. 8479.
circulation.
It bears recalling, however, that when the Supreme Court
Dissatisfied with the amendments incorporated into the new mediates to allocate constitutional boundaries or invalidates the
law by his own colleagues in Congress, Honorable Enrique T. acts of a coordinate body, what it is upholding is not its own
Garcia filed the instant petition. supremacy but the supremacy of the Constitution. With this in
mind, we now focus on the provisions of R.A. 8479, in
The Court is the ultimate guardian of our Constitution. By particular the 4% tariff differential, minimum inventory level,
virtue of its power of judicial review, it is duty-bound in an and predatory pricing provisions, which aim to prevent the big
appropriate case to ascertain whether a law is free from three oil companies from taking advantage of deregulation as a
constitutional flaws. While favoring free competition in the oil means of cartelizing their operations, and thereby result in
industry, the Court struck down R.A. 8180 because of monopolistic and oligopolistic practices condemned by the
provisions therein that contravened the basic law, our basic law of the land.
Constitution. Before dwelling into the issues now raised by the
petitioner, we must determine whether R.A. 8479 truly cured First, the 4% tariff differential. On December 31, 1997, after
the invalid portions of R.A. 8180. When we advocated the Court declared with finality that R.A. 8180 is
vigilance in unconstitutional, President Ramos issued Executive Order No.
461. The Order imposed a three percent (3%) import duty on
petroleum products enumerated therein. The President’s move removed, giving the new entrants opportunities to use their
avoided the revival of the old tariff rates of 10% on crude oil resources to be more competitive.
and 20% on refined oil while the legislative department was in
the process of crafting a new oil deregulation law. Noteworthy, Third, predatory pricing. In the December 3, 1997 Resolution
Sec. 6 of R.A. 8479 imposed the same tariff treatment on of the Court in G.R. Nos. 124360 and 127867, we expressed
petroleum products. Section 6 reads: the view that the definition of predatory pricing was too loose
to be a real deterrent.10 Congressman Dante O. Tinga
“SEC. 6—a) Any law to the contrary notwithstanding and acknowledged in his explanatory note of House Bill 10057
starting with the effectivity of this Act, a single and uniform (H.B. 10057) that the definition of predatory pricing needed
tariff duty shall be imposed and collected both on imported specificity, particularly with respect to the definitive
crude oil and imported refined petroleum products at the rate of benchmark price and the express anti-competitive intent. He
three percent (3%): Provided, however, That the President of suggested the AreedaTurner test and proposed to redefine
the Philippines may, in the exercise of his powers, reduce such predatory pricing. Section 11 par. (b) of R.A. 8479 adopted
tariff rate when on his judgment such reduction is warranted, Congressman Tinga’s recommendation, to wit:
pursuant to Republic Act No. 1937, as amended, otherwise
known as the “Tariff and Customs Code:” Provided, further, “b) Predatory pricing which means selling or offering to sell
That beginning January 1, 2004 or upon implementation of the any oil product at a price below the seller’s or offeror’s average
Uniform Tariff Program under the World Trade Organization variable cost for the purpose of destroying competition,
and ASEAN Free Trade Area commitments, the tariff rate shall eliminating a competitor or discouraging a potential competitor
be automatically adjusted to the appropriate level from entering the market: Provided, however, That pricing
notwithstanding the provisions under this Section.” below average variable cost in order to match the lower price
of the competitor and not for the purpose of destroying
253 competition shall not be deemed predatory pricing. For
purposes of this prohibition, ‘variable cost’ as distinguished
VOL. 321, DECEMBER 17, 1999 253 from ‘fixed cost,’ refers to costs such as utilities or raw
Garcia vs. Corona 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.”
Second, the minimum inventory level requirement. R.A. 8479
eliminated the provision in R.A. 8180 requiring the refiners and
To strengthen the anti-trust safeguards of R.A. 8479,
importers to maintain a minimum inventory equivalent to ten
respondents argue that there are enough provisions to
percent (10%) of their respective annual sales volume or forty
encourage entry of new participants. For instance, R.A. 8479
(40) days’ supply. The minimum inventory requirement was
allows for active participation of the private sector and
cooperatives in the retail of petroleum through joint ventures to petroleum products, except premium gasoline. The Automatic
establish Oil Pricing Mechanism was maintained to approximate the
domestic prices of petroleum products in the international
________________ market. The Energy Regulatory Board (ERB) approved a
market-oriented formula to determine the Wholesale Posted
10
Supra, see note 6 at 345. Price of petroleum products based solely on the changes of
either the Singapore Posting of refined petroleum products, the
254 Singapore Import Parity or the crude landed cost.

254 SUPREME COURT REPORTS ANNOTATED ________________

Garcia vs. Corona 11
Section 17 of Republic Act Number 8479—Buffer Fund:
The President may, when the interest of the consumers so
gasoline stations. Moreover, R.A. 8479 requires initial public requires, taking into account the rise in the domestic prices of
offering of shares equivalent to 10% of the capital investments petroleum products, use the “Reserve Control Account” as a
by oil companies. Respondents also cite that the enforcement buffer fund in the amount not exceeding Two billion nine
of monitoring activities by the DOE encourages consumer hundred million pesos (2,900,000,000.00) to cover increases in
vigilance over unwarranted increase in the prices of petroleum the prices of petroleum products, except premium gasoline,
products. Another safeguard against collusion among during the Transition Phase over the prices prevailing as of the
oligopolists is the creation of a task force with members from date of the effectivity of this Act. x x x.
the DOE and the Department of Justice (DOJ) to investigate
complaints for violations of R.A. 8479. They assert that the 255
mere dominance of Petron, Pilipinas Shell, and Caltex, is not
per se a combination in restraint of trade. Combination in
restraint of trade, they claim, is the means to achieve VOL. 321, DECEMBER 17, 1999 255
monopoly. Garcia vs. Corona

Petitioner Garcia adverts to oil deregulation in phases. The new After the transition phase comes full deregulation as provided
oil deregulation law has two phases: (1) the transition phase by Sec. 19 of R.A. 8479, which reads thus:
and (2) the full deregulation phase.
“Sec. 19. Start of Full Deregulation.—Full deregulation of the
During the transition period, all non-pricing aspects were lifted. Industry shall start five (5) months following the effectivity of
Although the Oil Price Stabilization Fund was abolished, a this Act: Provided however, That when the public interest so
buffer fund11 was created to cover increases in the prices of requires, the President may accelerate the start of full
deregulation upon the recommendation of the Department of requires, the President may accelerate the start of full
Energy (DOE) and the Department of Finance (DOF) when the deregulation upon 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
12
prospects: Provided, further, That the foregoing provision Rollo, p. 46.
notwithstanding, the five (5)-month Transition Phase shall
continue to apply to LPG, regular gasoline and kerosene as 256
sociallysensitive petroleum products and said petroleum
products shall be covered by the automatic pricing mechanism 256 SUPREME COURT REPORTS ANNOTATED
during the said period.”12 Garcia vs. Corona
Note that the abovecited transition phase of five months could
be abbreviated when public interest so requires. The recommendation of the Department of Energy (DOE) and the
President’s power to accelerate the start of full deregulation, Department of Finance (DOF) when the prices of crude oil and
however, depended upon the recommendation of the petroleum products in the world market are declining and the
Departments of Energy and Finance. value of the peso in relation to the US dollar is stable, taking
into account relevant trends and prospects: Provided, further,
Accordingly as recommended, on March 14, 1998, President That the foregoing provision notwithstanding, the five (5)-
Ramos issued E.O. 471 to accelerate the implementation of full month Transition Phase shall continue to apply to LPG; regular
deregulation. Pertinently this E.O., which implements R.A. gasoline and kerosene as sociallysensitive petroleum products
8479, provides: and said petroleum products shall be covered by the automatic
pricing mechanism during the said period’;
“WHEREAS, Republic Act No. 7638, otherwise known as the
‘Department of Energy Act of 1992,’ provides that, ‘at the end “WHEREAS, pursuant to the joint recommendation of the
of four years from its effectivity last December 1992, the Department of Energy and the Department of Finance, and in
Department [of Energy] shall, upon approval of the President, the interest of the consuming public, recent developments favor
institute the programs and timetable of deregulation of the acceleration of the start of full deregulation of the
appropriate energy projects and activities of the energy sector’; downstream oil industry because: (i) the prices of crude oil and
petroleum products in the world market are beginning to be
“WHEREAS, Section 19 of Republic Act No. 8479, otherwise stable and on a downtrend since January 1998; and (ii) the
known as the ‘Downstream Oil Industry Deregulation Act of exchange rate of the peso in relation to the US dollar has been
1998,’ provides that [T]that ‘when the public interest so stable for the past three months, averaging at around P40.00 to
one US dollar;
“WHEREAS, Executive Order No. 377 dated 31 October 1996 rate of peso in relation to US dollar, taking into account
provides for an institutional framework for the administration relevant trends and prospects.
of the deregulated industry by defining the functions and
responsibilities of various government agencies; However, E.O. 471 carried an additional proviso, the transition
phase was continued for LPG, regular gas and kerosene. These
“WHEREAS, pursuant to Republic Act No. 8479, the socially sensitive products continued to be covered by the
deregulation of the industry will foster a truly competitive automatic pricing mechanism until July of 1998. Only then was
market which can better achieve the social policy objectives of full deregulation of the industry effected, and the automatic
fair prices and adequate, continuous supply of pricing mechanism was also lifted for LPG, regular gas and
environmentally-clean and high quality petroleum products; kerosene.

“NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Turning now to herein petition, Congressman Enrique Garcia
Philippines, by the powers vested in me by law, do hereby raised the following issues to assail the provision implementing
declare the full deregulation of the downstream oil industry; full deregulation of the oil industry:
provided, however, that LPG, regular gasoline and kerosene
shall be covered by the Automatic Pricing Formula pursuant to 1. I. SECTION 19 OF R.A. No. 8479 which provides for
R.A. No. 8479.”13 full deregulation five (5) months or earlier following
the effectivity of the law, is glaringly pro-oligopoly,
The implementing guidelines for the acceleration of full anti-competition and anti-people, and is therefore
deregulation of the industry, set forth in E.O. 471, required the patently unconstitutional for being in gross and cynical
concurrence of two conditions, viz.: (1) the downtrend of prices contravention of the constitutional policy and command
of oil and petroleum products, and (2) stability of exchange embodied in Article XII, Section 19 of the 1987
Constitution against monopolies and combinations in
________________ restraint of trade.
2. II. Said Section 19 of R.A. No. 8479 is glaringly pro-
13
“Annex 2” of Public Respondent’s Comment. oligopoly, anti-competition and anti-people, for the
further reason that it palpably and cynically violates the
257 very objective and purpose of R.A. No. 8479, which is
to ensure a truly competitive market under a regime of
VOL. 321, DECEMBER 17, 1999 257 fair prices.
3. III. Said Section 19 of R.A. No. 8479, being glaringly
Garcia vs. Corona
prooligopoly, anti-competition and anti-people, being
patently unconstitutional and being palpably violative
 of the law’s policy and purpose of ensuring a truly oligopoly, anti-competition and anti-people and is patently
competitive market under a regime of fair prices, is a unconstitutional because the period is too short to establish true
very grave and grievous abuse of discretion on the part competition in the local oil industry. True competition, he
of the legislative and executive branches of claims, exists only when there can be a sizable number of
government. players, and at present, the new players comprise only 3% of
4. IV. Premature full deregulation under Section 19 of the market share which does not put up real competition
R.A. No. 8479 may and should therefore be declared against the “Big Three” oil companies (Caltex, Shell and
null and void even as the rest of its provisions remain in Petron). What he suggests is to prolong the transition phase or
force, such as the transition phase or partial partial deregulation with price controls while the big oil
deregulation with price controls that ensures the companies are still dominating the market, to ensure the
protection of the public interest by preventing the big 3 protection of the public interest and prevent the big three
oligopoly’s price-fixing and overpricing. oligopolies from fixing the price or overpricing. He further
contends that the automatic oil pricing mechanism will enable
258 the domestic price of petroleum products to approximate and
promptly reflect the price of oil in the international market. He
258 SUPREME COURT REPORTS ANNOTATED also stressed that new players may come under an indefinite or
Garcia vs. Corona open-ended transition phase.

Commenting on the petition, respondents claim that the

These issues may be synthesized into one: Whether or not the propriety of full deregulation involves the wisdom of Congress
full implementation of deregulating the downstream oil and is therefore, a non-justiciable issue. They counter
industry as provided in Section 19 of R.A. 8479 violates the petitioner’s arguments by pointing out that the shortening of
Constitutional mandate of free competition in a liberalized oil the transition period and acceleration of full deregulation were
industry under Section 19, Article XII of the 1987 Philippine decreed pursuant to the joint recommendation of the DOE and
Constitution? DOF, based on the concurring conditions of a downtrend
Petitioner Garcia principally faults Section 19 of the new R.A. 259
8479 as well as E.O. 471 now for violating the constitutional
prohibition against monopoly, and being anti-competition.
VOL. 321, DECEMBER 17, 1999 259
Petitioner claims that there was a premature full deregulation Garcia vs. Corona
under Section 19 of R.A. 8479. He protests the acceleration of
the full implementation of deregulation decreed under E.O. of crude oil in world market and the stability of the exchange
471. Petitioner insists that the short transition period is pro- rate of P40.00 to US$1.
The respondents argue that the short transition period is not Solicitor General for Public Respondents pp. 15-16. According
violative of the Constitution because the new players were to the article, there have been two major lines of criticism to
given until July 1998 to set up their businesses as they have in the use of price regulation (1) regulators are quickly captured
fact, and they have captured at least 3% of the total oil market. by the firms that they regulate and (2) such regulation induces
inefficient and wasteful behavior. The outcome of such
Respondent Petron asserts that full deregulation protects the incentives are inefficiency and overuse of capital under rate of
public from the greed and exploitation of business. Petron return regulation.
further contends that competition can be ushered in only with
the certainty of price deregulation and the short transition 260
period would guarantee the investors that within a manageable
period, they would be able to set prices, taking into account 260 SUPREME COURT REPORTS ANNOTATED
their investment and operating costs. It claims an indefinite Garcia vs. Corona
transition period would discourage new investors because the
new players had hoped that within a reasonable time, price
will never take place and it would render the entire law
regulation would be lifted.
different from what was passed by Congress.
The Solicitor General filed a comment on behalf of the public
respondents, interposing economic arguments that price Petitioner counters that he is questioning the constitutionality
regulation reduces economic efficiency and is prejudicial to the rather than the wisdom of Sec. 19 of R.A. 8479; it is
public.14 Public respondents assert that the acceleration of full prooligopoly, hence patently unconstitutional. Petitioner further
deregulation is based on existing conditions and sound avers that condemnation against monopolies and combination
economic theory. in restraint of trade should be given legal sanction by the Court.
Petitioner maintains that the nullification of Sec. 19 of R.A.
8479 will result in partial deregulation, where there will be no
Respondent Shell filed a rejoinder, stating that to prolong the
regulation as regards the importation of petroleum products and
transition period will revive the automatic pricing mechanism
the establishment of gas station, but oil pricing would be
which means that it will only replace the mode of price
regulated based on the Automatic Pricing Mechanism.
regulation by still another regulatory scheme. It argues that if
Sec. 19 of R.A. 8479 were to be struck down, full deregulation
Note that during the review of R.A. 8180 by the Court in G.R.
No. 127867, petitioners Edcel C. Lagman, Arroyo, et al.,
________________
likewise questioned the constitutionality of Section 15 of R.A.
No. 818015 as well as E.O. No. 39216 which provided for the
14
See David Weimer and Aidan Vining, “Policy Analysis:
implementation of full deregulation. The Court decreed thus:
Concepts and Practice, 1992 ed., pp. 124, 126—Comment—
________________ “. . . Full deregulation at the end of March 1997 is mandatory
and the Executive has no discretion to postpone it for any
15
Sec. 15. Implementation of Full Deregulation.—Pursuant to purported reason. Thus, the law is complete on the question of
Section 5(e) of Republic Act No. 7638, the DOE shall, upon the final date of full deregulation. The discretion given to the
approval of the President, implement the full deregulation of President is to advance the date of full deregulation before the
the downstream oil industry not later than March, 1997. As far end of March 1997. Section 15 lays down the standard to guide
as practicable, the DOE shall time the full deregulation when the judgment of the President—he is to time it as far as
the prices of crude oil and petroleum products in the world practicable when the prices of crude oil and petroleum
market are declining and when the exchange rate of the peso in products in the world market are declining and when the
relation to the US dollar is stable. Upon the implementation of exchange rate of the peso in relation to the US dollar is stable.
the full deregulation as provided herein, the transition phase is
deemed terminated and the following laws are deemed xxx
repealed:
“It ought to follow that the argument that E.O. No. 392 is null
xxx and void as it was based on indeterminate standards set by R.A.
8180 must likewise fail. If that were all to the attack against the
16
xxx validity of E.O. No. 392, the issue need not further detain our
discourse.”17
“WHEREAS, Section 15 of Republic Act No. 8180, otherwise
known as the ‘Downstream Oil Industry Deregulation Act of In G.R. No. 127867, Congressman Garcia filed an Urgent
1996,’ provides that ‘the DOE shall, upon approval of the Motion for Partial Reconsideration from the November 5,
President, implement the full deregulation of the downstream 1997, decision of the Court. He sought to strike down only the
oil industry not later than March, 1997. As far as practicable, premature full deregulation but maintain partial deregulation
the DOE shall time the full deregulation when the prices of under R.A. No. 8180 with price controls and price mechanism
crude oil and petroleum products in the world market are based on Singapore Posted Prices. The Court resolved the issue
declining and when the exchange rate of the peso in relation to this way:
the US dollar is stable”;
________________
261
“WHEREAS, pursuant to the recommendation of the
VOL. 321, DECEMBER 17, 1999 261 Department of Energy, there is an imperative need to
Garcia vs. Corona implement the full deregulation of the downstream oil industry
because of the following recent developments: (i) depletion of
the buffer fund on or about 7 February 1997 pursuant to the We are not impressed by petitioner Garcia’s submission.
Energy Regulatory Board’s Order dated 16 January 1997; (ii) Petitioner has no basis in condemning as unconstitutional per
the prices of crude oil had been stable at $21-$23 per barrel se the date fixed by Congress for the beginning of the full
since October 1996 while prices of petroleum products in the deregulation of the downstream oil industry. x x x The choice
world market had been stable since mid-December of last year. of March 1997 as the date of full deregulation is a judgment of
Moreover, crude oil prices are beginning to soften for the last Congress and its judgment call cannot be impugned by this
few days while prices of some petroleum products had already Court.”18
declined; and (iii) the exchange rate of the peso in relation to
the US dollar has been stable for the past twelve (12) months, Now in the present petition, Garcia insists on his old plea for a
averaging at around P26.20 to ONE US dollar; return only to partial deregulation of the downstream oil
industry, wherein the main features of deregulation would be
xxx permitted but the retail prices of oil products would still be
regulated through an Automatic Pricing Mechanism.
17
Supra, note 3, at 352-353.
However, I find his contentions to be lacking legal basis, even
262 if his proposal appears to be expedient, or even beneficial,
especially to the poor. As the Court said in Tañada vs.
262 SUPREME COURT REPORTS ANNOTATED Tuvera,19 “[T]his Court is not called upon to rule on the
Garcia vs. Corona wisdom of the law or to repeal it or modify it if we find it
impractical. That is not our function. That function belongs to
the legislator. Our task is merely to interpret and apply the law
“We shall first resolve petitioner Garcia’s linchpin contention as conceived and approved by the political departments of the
that the full deregulation decreed by R.A. No. 8180 to start at government in accordance with the prescribed procedure.”20
the end of March 1997 is unconstitutional. For prescinding
from this premise petitioner suggests that ‘we simply go back For if we allow an open-ended transition period to maintain
to the transition period under R.A. No. 8180.’ Under the government pricing regulation, we would have suspended the
transition period, price control will be revived through the much-needed liberalization of the downstream oil industry. It
automatic pricing mechanism based on Singapore Posted would certainly run counter to the government’s policy of
Prices. The Energy Regulatory Board x x x would play a
limited and ministerial role of computing the monthly price
________________
ceiling of each and every petroleum fuel product, using the
automatic pricing formula. x x x 18
Supra, note 6, at 353.
19
146 SCRA 446 (1986). question” connotes what it means in ordinary parlance, namely,
a question of policy.24 It refers to “those questions which,
20
Id., at 455-456. under the Constitution, are to be decided by the people in their
sovereign capacity, or in regard to which full discretionary
263 authority has been delegated to the legislative or executive
branch of the government.”25 It is concerned with issues
VOL. 321, DECEMBER 17, 1999 263 dependent upon the wisdom, not legality,
Garcia vs. Corona
________________
allowing free interplay of market forces, with minimal 21
73 Am. Jur. 2d. Sec. 374.
government supervision. In fact, it could defeat full
deregulation to ensure fair competition in the downstream oil 22
Id., citing Winslow v. Fleischner, 112 Or 23, 228 P 101, 34
industry, where new and prospective players are on even level
ALR 826.
playing field with the Big Three.
23
Id., citing King v. State, 87 Tenn 304, 10 SW 509.
Furthermore, to base the implementation of full deregulation on
the presence of a sizable number of new investors, as petitioner 24
Daza vs. Singson, 180 SCRA 496, 500 (1989); citing Tañada
would want us to do, would be to legislate a floating provision
vs. Cuenco, 103 Phil. 1051 (1957), Association of Small
dependent on the happening of a contingent event. To do so,
Landowners in the Philippines, Inc. vs. Secretary of Agrarian
would be to undermine the very purpose of the law, which is to
Reform, 175 SCRA 343, 377 (1989).
liberalize and deregulate the downstream oil industry in order
to ensure a truly competitive market under a regime of fair 25
Ibid.
prices, adequate and continuous supply, environmentally clean
and high-quality petroleum products.
264
Consequently, to heed the petitioner’s prayer, this Court would
have to legislate, a power granted only to Congress. The 264 SUPREME COURT REPORTS ANNOTATED
operation of a statute may be duly suspended only by authority Garcia vs. Corona
of the legislature.21 Indeed, a suspension of a valid statute must
rest upon legislative action;22 it may not be effected solely by a of a particular measure.26 The judiciary does not directly settle
judicial act.23 Clearly it is a policy decision of the legislative policy issues. Under our system of government, policy issues
and executive departments in whose turf we must not tread, are within the domain of the political branches of government
under the principle of separation of powers. The term “political
 28
and of the people themselves as the repository of all state 190 SCRA 717 (1990).
powers.27
29
Id., at 737.
28
In PLDT vs. National Telecommunications Commission, the
30
ultimate considerations cited in matters affecting vital Basco vs. Phil. Amusements and Gaming Corporation, 197
industries, are the public need, public interest, and the common SCRA 52, 68 (1991); citing Yu Cong Eng vs. Trinidad, 47 Phil.
good. In that case, the Court said: 385 (1925); Salas vs. Jarencio, 46 SCRA 734 (1972); Peralta
vs. COMELEC, 82 SCRA 30 (1978); Abbas vs. COMELEC,
“Free competition in the industry may also provide the answer 179 SCRA 287 (1989).
to a much-desired improvement in the quality and delivery of
31
this type of public utility, to improved technology, fast and Salas vs. Jarencio, 46 SCRA 734, 749 (1972).
handy mobile service, and reduced user dissatisfaction.”29
265
Similarly, the above-mentioned considerations could undergird
the nation’s energy and other economic policies. The VOL. 321, DECEMBER 17, 1999 265
liberalization of the oil industry is a reform program initiated Garcia vs. Corona
by Congress to free the government from the obligation of
infusing funds to subsidize increases in the prices of oil
products. Such funds may now be utilized for other much That infringement, however, must be proved and established
needed programs with a public purpose. persuasively to invalidate a provision of a law, if not the entire
law itself.
Well-established is the principle that every law has in its favor
the presumption of constitutionality.30 To declare a law Petitioner ought to have demonstrated the need for the
unconstitutional, the repugnancy of that law to the Constitution extension of the transition period. But, in fact, he could not
must be clear and unequivocal. But we recognize that even if a downplay the DOE report that new players accounted for a
law is aimed at the attainment of some public good, still its sizable share of the market, some 18.1 percent of the total
provisions cannot infringe upon constitutional rights.31 product imports, and competing companies are keen in joining
the Philippine oil industry since the full implementation of
________________ deregulation. And, as stressed by the public respondents in the
rejoinder dated January 7, 1999:
26
Ibid.
“Since 1996, new players have taken a significant share in the
27 market, to wit: (a) seven (7) new players have entered the
Valmonte vs. Belmonte, Jr., 170 SCRA 256, 268 (1989).
downstream oil industry before RA No. 8180; (b) during the
effectivity of RA No. 8180, twenty eight (28) new players have The petitioner strongly manifested his fears concerning
engaged in a number of downstream oil industry activities; and pernicious consequences of total lifting of price control in the
(c) three (3) new players have engaged in fuel bulk marketing, oil industry. His main concern is that the government might be
while two (2) new players have started to establish gasoline helpless in case the Big 3 (Shell, Petron and Caltex) over-price
service stations immediately before and during the effectivity their petroleum products. But the people are not without legal
of RA No. 8479. At the same time, many more companies have recourse. The public can manifest outright objections to
indicated their intention to enter the downstream oil industry overpricing and report to the Department of Energy any
business.”32 unreasonable increase in the prices of these oil products. The
monitoring power of the DOE is embodied in Sec. 14 of R.A.
The new players, according to industry experts, are gradually 8479, and its implementing rule, Section 18 of DOE Circular
making a dent in the local market and their share is expected to No. 98-03-004, thus:
surge in a few years when their retail stations are established.33
“R.A. 8479, Sec. 14—Powers and Functions of the DOE and
However, the presence or entry of numerous players in the oil DOE Secretary.”
industry is not a condition precedent before a full deregulated
petroleum industry could be had. But we recognize that it is “Monitoring—
precisely the implementation of full deregulation that would
serve to entice new players to compete against the so-called “a) The DOE shall monitor and publish daily international
Big Three. Hopefully, this move would prevent the powerful crude oil prices, as well as follow the movements of domestic
oil companies from manipulating prices, to the prejudice of the oil prices. It shall likewise monitor the quality of petroleum
consumers and the public in general. products and stop the operation of business involved in the sale
of petroleum products which do not comply with the national
________________ standards of quality that are aligned with the national
standards/protocols of quality. . . .
32
Public respondents’ Rejoinder, p. 7.
xxx
33
The Philippine Star, November 23, 1998 issue.
“d) Any report from any person of an unreasonable rise in the
266 prices of petroleum products shall be immediately acted upon.
For this purpose, the creation of DOE-DOJ Task Force is
266 SUPREME COURT REPORTS ANNOTATED hereby mandated to determine within thirty (30) days the
Garcia vs. Corona merits of the report and initiate the necessary actions warranted
under the circumstances: Provided that nothing herein shall
prevent the said task force from investigating and/or filing the and white for Kerosene. In the case of LPG (which has no
necessary complaint with the proper court or agency motu product color), the price display board may be light blue in
proprio.” color. The numeric entries in these boards shall be at least six
(6) inches in height.
Department Circular No. 98-03-004, Sec. 18—Powers and
Functions of the DOE and DOE Secretary The price display boards shall be properly installed and labeled
not later than June 30, 1998. Failure to comply with this
“Monitoring— requirements shall be penalized pursuant to Section 24 of the
Act.
“The DOE shall monitor the following pursuant to Section 14
of the Act. Any misrepresentation, mislabeling, concealment or (2) Unreasonable Rise in Prices
fraud, shall be subject to penalties under existing applicable
laws. Any report from any person of an unreasonable rise in the
prices of petroleum products shall be immediately acted upon
a. Prices by the DOE-DOJ Task Force in accordance with Section 17 of
this IRR. The said Task force shall determine within thirty (30)
267 days the merits of the report and shall initiate the necessary
actions warranted under the circumstances.”
VOL. 321, DECEMBER 17, 1999 267
Garcia vs. Corona A calculus of fear and pessimism, however, does not justify the
remedy petitioner seeks: that we now overturn a law enacted by
Congress and approved by the Chief Executive. The Court
“The DOE shall monitor and publish international oil prices as must act on-valid legal reasons that will explain why we should
well as follow the movement of domestic oil prices. interfere with vital legislation.34 To strike down a
(1) Price Display Boards ________________
For the convenience of the public, all retailers of petroleum 34
Tolentino vs. Secretary of Finance, 235 SCRA 630, 674
products shall display the prices of each type of petroleum (1994); citing Alalayan vs. National Power Corp., 24 SCRA
product sold in gasoline stations in prominently installed price 172 (1968); Cordero vs. Cabatuando, 6 SCRA 418 (1962);
display boards with backgrounds preferably conforming to the Sumulong vs. COMELEC, 73 Phil. 288 (1941). As of
color coding scheme for the product, such as: green for December 10, 1999, Philippine Star, p. 26, reports that “the
Unleaded Premium Gasoline, red for Premium Low Lead
Gasoline, orange for Regular Gasoline, yellow for Diesel Fuel,
deregulation of the oil industry under Republic Act (RA) 8479
has resulted in the entry of 53 new players,

268

268 SUPREME COURT REPORTS ANNOTATED

Employees’ Compensation Commission vs. Sanico

provision of law we need a clear showing that what the

Constitution prohibits, the statute has allowed to be done.35
Since there is no clear showing that Section 19 of R.A. 8479
has violated the constitutional prohibition against monopolies
and combinations in restraint of trade, I vote that the present
petition be DISMISSED.

Petition dismissed.