1)  

     Discuss the following:

1.1  Anti-Competitive Agreements between and among competitors

Agreement refers to any type or form of contract, arrangement, understanding,

collective recommendation, or concerted action, whether formal or informal, explicit or tacit,
written, or oral. Vertical and Horizontal Agreements are included. These include Cartels and
other Collusive Agreements.

Horizontal Agreements that are Prohibited Per Se

(1) Restricting competition as to price, or components thereof, or other terms of trade;

(2) Price fixing, Bid-Rigging, Output Limitation and Market Sharing. Fixing the price at an
auction or in any form of bidding, including cover bidding, bid suppression, bid rotation and
market allocation, and other analogous practices of bid manipulation.

Prohibited Depending on Effect. The following are prohibited only if its object or
effect is to substantially prevent, restrict, or lessen competition:
(1) Setting, limiting, or controlling production, markets, technical development, or investment;
(2) Dividing or sharing the market, whether by volume of sales or purchases, territory, type of
goods or services, buyers or sellers or any other means.
Catch all Provision: Any agreements which has the object or effect of substantially
preventing, restricting or lessening competition is prohibited. However, an agreement which
contributes to improving the production or distribution of goods and services or to promoting
technical or economic progress, while allowing consumers a fair share of the resulting
benefits, may not necessarily be deemed a violation.

1.2  Abuse of dominant position

a. “Dominant position” refers to a position of economic strength that an entity or

entities hold which makes it capable of controlling the relevant market independently from
any or a combination of the following: competitors, customers, suppliers, or consumers. Thus,
actual monopoly is not required.
b. Dominant position by itself is not a violation; and entity that is big and dominant
does not violate the law. It is abuse of dominant position that is prohibited. Example: PCA
provides that nothing in the same law “shall be construed or interpreted as a prohibition on
having a dominant position in a relevant market or on acquiring, maintaining and increasing
market share through legitimate means that do not substantially prevent or lessen
competition”(Sec. 15, PCA).
c. Single economic unit rule applies, hence, there is deemed to be no competition
within the same economic unit. For example, it does not follow that there is violation if a
parent company sets the price of goods of its subsidiary.

Rule: It shall be prohibited for one or more entities to abuse their dominant position
by engaging in conduct that would substantially prevent, restrict, or lessen competition.

A) “Conduct” refers to any type or form of undertaking, collective recommendation,

independent or concerted action or practice, whether formal or informal.

1.3  Anti-competitive merger or acquisition prohibited

 The PCC may declare that merger or acquisition agreement is a prohibited merger or
acquisition agreement that substantially prevents, restricts or lessens competition in the
relevant market or in the market for goods or services as may be determined by the PCC.
(Sec. 20, R.A. No. 10667)

A) If the Merger or Acquisition Agreement is found to be anti-competitive, the PCC

may:
1) Prohibit the implementation of the agreement;
2) Prohibit the implementation of the agreement unless and until it is modified by
changes specified by the PCC;
3) Prohibit the implementation of the agreement unless and until the pertinent party or
parties enter into legally enforceable agreements specified by the PCC.

B) Exemptions from Prohibited Mergers and Acquisitions. - Merger or acquisition

agreement which is prohibited may, nonetheless, be exempt from the prohibition by the PCC
when the parties establish either of the following:

1) The concentration has brought about or is likely to bring about gains in efficiencies
that are greater than the effects of any limitation on competition that result or likely to
result from the merger or acquisition agreement; or
2) A party to the merger or acquisition agreement is faced with actual or immiment
financial failure, and the agreement represents the least anti-competitive arrangement
among the known alternative uses for the failing entity’s assets (Sec. 21, R.A. No.
10667).

Notes: (1) An entity shall not be prohibited from continuing to own and hold the
stock or other share capital or assets of another corporation which it acquired prior to the
approval of R.A. No. 10667 or acquiring or maintaining its market share in a relevant market
through such means without violating the provisions of R.A. No. 10667;
(2) The acquisition of the stock or other share capital of one or more corporations
solely for investment and not used for voting or exercising control and not to otherwise bring
about, or attempt to bring about the prevention, restriction, or lessening of competition in the
relevant market shall not be prohibited.

1.4   Threshold for notification

 
The MINIMUM THRESHOLD is provided for under Section 16 of the PCA.
However, the power to adjust the threshold was delegated to the PCC and the latter by virtue
of its delegated power modified the rules under PCC Memorandum Circular No. 18-001 dated
March 1, 2018.

Concurring Tests. In determining if the merger or acquisition falls beyond the

threshold imposed by law and the PCC, it is necessary to APPLY BOTH the (1) Size of
Entity Test and (2) The Size of the Transaction Test.

Size of Entity Test: The aggregate annual gross revenues in, into or from the
Philippines, or value of the assets in the Philippines of the ultimate parent entity of at least
one of the acquiring or acquired entities, including that of all entities that the ultimate parent
entity controls, directly or indirectly, exceeds P5 Billion (Sec. 16, PCA; PCC Mem. Cir. No.
18-001 dated March 1, 2018).

Size of Transaction Test: The value of the transaction exceeds Two Billion Pesos
(Php 2,000,000,000.00) (Sec. 16, PCA; PCC Mem. Cir. No. 18-001 dated March 1, 2018).
A) Mergers and Acquisitions (M and A) within the Philippines: With respect a
proposed merger or acquisition of assets in the Philippines if either:
 1) The aggregate value of the assets in the Philippines being acquired in the proposed
transaction exceeds P2 Billion; or
2) The gross revenues generated in the Philippines by assets acquired in the Philippines
exceed P2 Billion.
B) M and A outside the Philippines
1) The aggregate value of the assets in the Philippines of the acquiring entitiy exceeds P2
Billion; and
2) The gross revenues generated in or into the Philippines by those assets acquired
outside the Philippines exceed P2 Billion Pesos.
C) M and A Inside and Outside the Philippines. Concurrence of:
1) The aggregate value of the assets in the Philippines of the acquiring entity exceeds P2
Billion; and
2) The aggregate gross revenues generated in or into the Philippines by assets acquired in
the Philippines and any assets acquired outside the Philippines and any assets acquired
outside the Philippines collectively exceed P1 Billion.

 2) Explain the rationale why the Philippine Competition Commission should set the
threshold for notification on mergers and acquisitions.
 
“The rationale for setting the threshold for notification is to ensure that mergers and
acquisitions that are more likely to substantially lessen competition in the market for goods
and services are subject to compulsory notification, and to exclude those that are less likely to
pose competition concerns. Ensuring that certain mergers and acquisition be subject to
compulsory notification cannot be left to the discretion of persons or entities within those
market for goods and services” (PCA Decision in Case No. M-2-18-003).

3) What are the powers of the Philippine Competition Commission?

Section 12 of the PCA provides that the PCC shall have original and primary
jurisdiction over the enforcement and implementation of the provisions of the PCA, and its
implementing rules and regulations. The Commission shall exercise the following powers and
functions:
(a) Conduct inquiry, investigate, and hear and decide on cases involving any violation of
this Act and other existing competition laws motu proprio or upon receipt of a verified
complaint from an interested party or upon referral by the concerned regulatory agency, and
institute the appropriate civil or criminal proceedings;
(b) Review proposed mergers and acquisitions, determine thresholds for notification,
determine the requirements and procedures for notification, and upon exercise of its powers to
review, prohibit mergers and acquisitions that will substantially prevent, restrict, or lessen
competition in the relevant market;
(c) Monitor and undertake consultation with stakeholders and affected agencies for the
purpose of understanding market behavior;
(d) Upon finding, based on substantial evidence, that an entity has entered into an anti-
competitive agreement or has abused its dominant position after due notice and hearing, stop
or redress the same, by applying remedies, such as, but not limited to, issuance of injunctions,
requirement of divestment, and disgorgement of excess profits under such reasonable
parameters that shall be prescribed by the rules and regulations implementing the PCA;
(e) Conduct administrative proceedings, impose sanctions, fines or penalties for any
noncompliance with or breach of this Act and its implementing rules and regulations (IRR)
and punish for contempt;
(f) Issue subpoena duces tecum and subpoena ad testificandum to require the production
of books, records, aor other documents or data which related to any matter relevant to the
investigation and personal appearance before the Commission, summon witnesses, administer
oaths, and issue interim orders such as show cause orders and cease and desist orders after
due notice and hearing in accordance with the rules and regulations implementing this Act;
(g) Upon order of the court, undertake inspections of business premises and other
offices, land and vehicles, as used by the entity, where it reasonably suspects that relevant
books, tax records, or other documents which relate to any matter relevant to the investigation
are kept, in order to prevent the removal, concealment, tampering with, or destruction of the
books, records, or other documents;
(h) Issue adjustment or divestiture orders including orders for corporate reorganization or
divestment in the manner and under such terms and conditions as may be prescribed in the
rules and regulations implementing this Act. Adjustment or divestiture orders, which are
structural remedies should only be imposed:
(1) Where there is no equally effective behavioral remedy; or
(2) Where any equally effective behavioral remedy would be more burdensome for
the enterprise concerned than the structural remedy. Changes to the structure of an
enterprise as it existed before the infringement was committed would only be
proportionate to the substantial risk of a lasting or repeated infringement that derives
from the very structure of the enterprise;
(i) Deputize any and all enforcement agencies of the government or enlist the aid and
support of any private institution, corporation, entity or association, in the implementation of
its powers and functions;
(j) Monitor compliance by the person or entities concerned with the cease and desist
order or consent judgement;
(k) Issue advisory opinions and guidelines on competition matters for the effective
enforcement of this Act and submit annual and special reports to Congress, including
proposed legislation for the regulation of commerce, trade, or industry;
(l) Monitor and analyze the practice of competition in markets that affect the Philippine
economy; implement and oversee measures to promote transparency and accountability; and
ensure that prohibitions and requirements of competition laws are adhered to;
(m) Conduct, publish and disseminate studies and reports on anti-competitive conduct
and agreements to inform and guide the industry and consumers;
(n) Intervene or participate in administrative and regulatory proceedings requiring
consideration of the provisions of this Act that are initiated by government agencies such as
the Securities and Exchange Commission, the Energy Regulatory Commission and the
National Telecommunications Commission;
(o) Assist the National Economic and Development Authority, in consultation with
relevant agencies and sectors in the preparation and formulation of a national competition
policy;
(p) Act as the official representative of the Philippine government in international
competition matters;
(q) Promote capacity building and the sharing of best practices with other competition-
related bodies;
(r) Advocate pro-competitive policies of the government by:
(1) Reviewing economic and administrative regulations, motu proprio or upon request,
as to whether or not they adversely affect relevnt market competition, and advising the
concerned agencies against such regulations; and
(2) Advising the Executive Branch on the competitive implications of government
actions, policies and programs; and
(s) Charging reasonable fees to defray the administrative cost of the services rendered.”

Other Powers. In addition to the posers under Section 12, the PCC is also vested the power
to: (1) Exempt certain transactions from prohibited mergers and acquisitions (Sec. 21); (2)
Forebear the application of the provisions of the PCA for a limited period (Sec. 28); (3)
Impose administrative fines and penalties (Sec. 29); (4) Conduct preliminary inquiry and issue
Order of Temporary Cessation or Desistance (Sec. 31); (5) Order the closure of the violator
(Sec. 31).
 Batanes, Grace
SMU: Commercial Law Review
2nd Sem, AY 2020-2021