Module 5 - Philippine Competition Act | Atty.

Amago

also enables small businesses to

Philippine Competition Act compete with bigger businesses on fair
terms.
R.A. 10667 • Investments flow to markets that are
Effectivity: Aug. 8, 2015 marked by greater innovation, where
there is a level playing field, and where
I. Definition & Scope of Application competition is protected. With greater
investments come more jobs, which, in
• Enacted in 2015, Republic Act No. 10667 turn, increase consumption. Ultimately,
or the Philippine Competition Act (PCA) is competition contributes to economic
the country’s primary competition growth and poverty reduction.
law. It defines, prohibits, and penalizes
anti-competitive practices, with the aim Important Terms
of enhancing economic efficiency and
promoting free and fair competition in 1. Acquisition – purchase of securities or
trade, industry, and all commercial assets through contract or other means
economic activities. for the purpose of control

• SCOPE: The PCA covers: 2. Control – ability to substantially influence

or direct the actions or decisions of an
o Domestic - any person or entity entity (Section 25)
engaged in trade, industry,
and commerce in the Philippines. 3. Merger- joining two or more entities into
an existing entity or to form a new entity
o International - also applies to
international trade that may • Also includes consolidation
impact trade, industry, and • This is in order to regulate the
commerce in the Philippines. market

PCA has an extraterritorial 4. Agreement – any type or form of

application as it can cover contract, arrangement, understanding,
acts outside the concerted action
Philippines. It can likewise
cover government entities. • It may be formal or informal,
explicit or tacit, written or oral
o The PCA does not apply to • There’s no need for a physical
collective bargaining agreements control or agreement
or arrangements between workers
and employers, and other such 5. Market Dominant Position – position of
activities affecting conditions of economic strength which makes an entity
employment. capable of controlling the relevant market
independently
Why competition matters?
6. Market – group of goods or services that
• A competitive market is one where there are sufficiently interchangeable or
are multiple buyers and sellers. substitutable and the object of
• No single entity controls the price of competition, and the geographic are
goods or services. As such, businesses where said goods or services are offered
are more attuned to consumer demand
and have to innovate to make their 7. Relevant Market – market in which a
products different and better than the particular good or service is sold and
rest. which is a combination of the relevant
• For consumers: When businesses product market and the relevant
compete, consumers benefit through geographic market
lower prices, more product choices, and
better-quality goods and services. II. Powers & Functions of the Philippine
• For businesses: Businesses benefit from Competition Commission
competition, too. In competitive markets,
no company benefits from undue • The Philippine Competition
advantage. This makes it easier to start Commission (PCC) has original
and operate a new business. Competition and primary jurisdiction in the
 Module 5 - Philippine Competition Act | Atty. Amago

enforcement and regulation of all • Upon order of the court, undertake

competition-related issues. inspections of business premises and
• The PCC is the government other officers, land and vehicles
agency mandated to
implement the PCA and the • Issue adjustment or divesture orders
national competition policy. including orders for corporate
Established in February 2016, the reorganization or divestment
PCC is the main authority on
competition-related matters in the o Adjustment or divestiture orders,
country. which are structural remedies,
should only be imposed:
As the antitrust authority of the country, the PCC
is mandated to exercise the following powers and (1) Where there is no equally
functions: effective behavioral remedy; or

• Conduct inquiry, investigate, and hear (2) Where any equally effective
and decide on cases involving violations behavioral remedy would be more
of the PCA, its implementing rules, and burdensome for the enterprise
other competition laws; concerned than the structural
remedy. Changes to the structure
• Monitor and analyze the practice of of an enterprise as it existed
competition in markets, and issue before the infringement was
advisory opinion, rules, and guidelines on committed would only be
competition matters for the effective proportionate to the substantial
enforcement of the PCA; and risk of a lasting or repeated
infringement that derives from the
• Conduct, publish, and disseminate very structure of the enterprise;
studies, reports, and other publications
on competition matters to inform and • Divestment meaning PCA can ask a
guide the industry and consumers. corporation to buy out in some
transactions
• Review proposed mergers and
acquisitions ENFORCEMENT POWERS OF PCC

• Stop or redress entities that has entered FACT FINDING; PRELIMINARY INQUIRY
into anti-competitive agreement or has
abused dominant position by issuing - May be started motu proprio or upon
injunctions, requirement of filing of a verified complaint or upon
divestment, and disgorgement of referral by a regulatory agency
excess profits
- Office for Competition under the
o Disgorgement of excess profits Department of Justice created
(ex, grab was asked to give under EO 45 still exists with
rebates to the customers) power modified.
o This refers to Section 13.
• Conduct administrative proceedings, Office for Competition (OFC),
imposes sanctions, fines or penalties for Powers and Functions. The
any noncompliance or breach of the Act OFC under the Department of
and its IRR Justice (DOJ-OFC) shall only
conduct preliminary
• Issue subpoena duces tecum and investigation and
subpoena ad testificandum to require undertake prosecution of
production of books, records, etc. that all criminal offenses arising
are relevant to the investigation and under this Act and other
personal appearance before the competition-related laws in
commission accordance with Section 31 of
Chapter VI of this Act. The OFC
• Issue show cause orders and cease shall be reorganized and
and desist orders allocated resources as may be
required therefor to effectively
pursue such mandate.)
 Module 5 - Philippine Competition Act | Atty. Amago

- Prelim inquiry shall be completed order. This shall include payment of a

within 90 days fine, required compliance report,
payment of damages to any private
LENIENCY PROGRAM parties, other terms & conditions.
- to be granted to any entity in the form
of immunity from suit or reduction - This order will not bar any inquiry in
of any fine which would otherwise the future though if the acts are
be imposed on a participant in an continued or repeated.
anti-competitive agreement as
provided in Section 14 (a) and 14 (b) d) Monitoring Compliance – commission
of this Act in exchange for the may just monitor compliance of an entity.
voluntary disclosure of If it passes, issue a certification or
information regarding such an resolution to the effect that the entity has
agreement which satisfies specific complied with a final and executory
criteria prior to or during the fact- ruling, order, or approval.
finding or preliminary inquiry stage of
the case. e) Inadmissibility of Evidence in
Criminal Proceedings – any admitted
NOLO CONTENDERE fact or evidence submitted shall not be
- an entity charged under provisions of admissible as evidence in any criminal
ACA may enter a plea of nolo proceedings arising from the same act.
contendere, in which he does not
accept nor deny responsibility for TN: While it has original and primary
- the charges but agrees to accept jurisdiction in the enforcement and
punishment as if he had pleaded regulation of all competition-related issues,
guilty. The plea cannot be used the PCC works with relevant sector regulators
against the defendant entity to prove on matters where the regulators’ innate
liability in a civil suit arising from expertise and knowledge in the sector are
the criminal action nor in another critical.
cause of action
- the plea may be entered only up - Independent Quasi-Judicial Body.
to arraignment and after that it - Attached Agency to the Office of the
should only be with the President
permission of the court - Fine will be tripled if the violation
involves the trade or movement of
NON ADVERSERIAL REMEDIES basic necessities and prime
commodities under RA 7581
a) Binding Ruling – when no prior - PCC can issue order for contempt
complaint/investigation has been - Any person who suffers direct injury
initiated, an entity which in doubt as to by reason of any violation of this act
the legality of their actions may request may institute separate and
the Commission to render a binding rule independent civil action after the
for a specified period. commission has completed the
preliminary inquiry
- If case of an adverse binding rule, the - Decisions of the commission shall be
applicant will be given 90 days to appealed to the Court of Appeals
abide by the ruling and if complied - RTC will have original and exclusive
with, the entity will not be subject to jurisdiction over all the criminal and
admin, civil, or criminal action. civil cases involving violations of this
Act or other competition-related laws
b) Show Cause Order – commission may (regardless of penalties)
just order an entity to show cause why no o Principal business
order of cease and desists should be o Where the business
issued against them and then pay the fine act/conduct constitutes the
or re-adjust its business conduct or subject matter of a case
practices
STATUTE OF LIMITATION: 5 YEARS!
c) Consent Order – before the conclusion
of the inquiry, any entity without a) Criminal – from the time violation is
admitting a violation, may submit a discovered by the offended party
written proposal for the entry of a consent
 Module 5 - Philippine Competition Act | Atty. Amago

b) Administrative and Civil Actions – from - It does not matter if the said
the time the cause of action accrues agreement is formal or informal,
explicit (i.e., written or announced) or
tacit, or in written or oral (i.e., verbal)
form. It is illegal for business
rivals to act together in ways that
can limit competition or hinder
other businesses from entering
the market.

Elements of ACA

I. There are two or more separate

entities;
II. Which enter into some form of
coordination (agreement, concerted
practice, decision); and
Composition III. Which anticompetitive per se or has an
- Chairperson and 4 Commissioners anticompetitive object or effect
appointed by the President
- Will have the rank equivalent to a i. Per se violation
cabinet secretary and undersecretary
- Salary will be based on an objective 1. Price Fixing | Restricting
classification system competition as to PRICE, or
- Fields: economics, law, finance, COMPONENTS thereof, or
commerce or engineering. OTHER TERMS OF TRADE;
- At least one (1) shall be a member of
the Philippine Bar with at least ten - Anything affecting the
(10) years of experience in the active price of commodities
practice of law
- At least one (1) shall be an economist 2. Bid Rigging | Fixing price at
- Executive Director will be appointed an auction or in any form of
by the Commission bidding including cover
bidding, bid suppression, bid
Term: seven (7) years, fixed term | 2/4 rotation and market allocation
commissioners shall have 5 years term and other analogues practices
of bid manipulation.
Quorum: three (3); required votes:
three (3) - Prices are affected due to
the agreements of the
III. Prohibited Acts parties and not due to the
fair play of the market
o Anti-competitive Agreements
o Abuse of Dominant Position ii. Non-per se violation (Object &
o Prohibited Merger & Acquisition Effect Prohibition, SLC Test)

Main prohibition: any act or agreement - Subject to the SLC test in

which have the object or effect of order to identify whether
substantially preventing, restricting, or an act is a violation or not
lessening competition shall be
prohibited The following agreements, between or
among competitors which have the
a. Anti-Competitive Agreements object or effect of substantially
preventing, restricting, or lessening
- are those that substantially prevent, competition shall be prohibited:
restrict, or lessen competition.
- The agreement may be any type or 1. Output Restriction |
form of contract, arrangement, or Setting, limiting or controlling
understanding between or among production, markets, technical
businesses to fix prices or manipulate development, or investment;
bids.
 Module 5 - Philippine Competition Act | Atty. Amago

- Agreement of entities to EX of Anti-competitive agreements:

withhold products in the
market in order to drive 1. Price Fixing - Businesses agree
the prices up to directly or indirectly fix
purchase or selling price, instead
2. Market Allocation | Dividing of letting supply and demand
or sharing the market determine the prices of goods and
(whether by volume of sales services.
or purchases, territory, type
of goods or services, buyers or 2. Output limitation - Businesses
sellers or any other means; agree to limit production by
restricting output or setting
- Agreement that their quotas, creating an artificial
divide customers shortage in the market that
subsequently drives up prices.
iii. Others (“SLC Test”)
3. Market sharing - Businesses
1. Input Restriction divide the market and claim
dominance according to territory,
- Agreement between the customer demographic, sales
supplier of a raw material volume or type, creating local
and a competitor to monopolies that deprive
restricting the production consumers of choice.
of raw materials to to other
competitors 4. Bid rigging - Businesses agree to
- EX: the only glass fix prices at an auction or
manufacturing company manipulate bids, forcing buyers to
restricts its supply of glass select the higher-priced “pre-
to other competitors selected” bid instead of the best
price.
- Agreements or acts that contribute to
improving the production or 5. Cartels - A cartel is an
distribution of goods and services or organization formed by
to promoting technical or economic competitors in a specific industry,
progress, while allowing consumers a which enables them to set prices
fair share of the resulting benefits, or control levels of production.
may not necessarily be deemed a Agreements to form cartels or to
violation of this Act. collude are considered anti-
competitive agreements.
TN:
“Not considered competitors for the b. Abuse of Dominant Position
purposes of this section” – those entity
that controls, is controlled by, or is under - A business may become dominant in
common control with another entity or a certain industry by gaining a
entities, have common interest, and are significant share in the market or
not otherwise able to decide or act becoming an industry leader by virtue
independently of each other of years in operation.
- In the conduct of their business,
dominant companies – considering
their size, scope, and position of
economic strength – may have a
disproportionately severe effect on
the market.
- Section 27 presumption of dominant
position

The PCA defines abuse of dominant

position as a conduct of an entity,
whether a company or an individual,
with dominant position that
 Module 5 - Philippine Competition Act | Atty. Amago

substantially prevents, restricts, or - Markets that are dominated by a

lessens competition in the market: single or a handful of large companies
are particularly vulnerable to anti-
1. Selling goods or services below
cost to drive competition out

2. Imposing barriers to entry or

committing acts that prevent
competitors from growing within
the market

3. Setting prices or other terms or

conditions that discriminate
unreasonably between
customers or sellers of the same
goods or services.
competitive practices.
EXCEPT:
Socialized pricing for EX of Abuse of Dominant Position:
less fortunate
Price differential which 1. Predatory pricing - A dominant
reflects differences in firm deliberately incurs losses in
the cost of the short term by selling goods or
manufacture, sale, or services below the cost of its
delivery production, which can eventually
Price differential in force its competitors out of
response to the business.
competitive price of
payments, services, or 2. Imposing Barriers to Entry –
changes in the facilities preventing competitors from
Price changes in growing. Imposing unfair
response to changing regulations to prevent other
market conditions, competitors from starting their
marketability of goods business
or services, or volume
3. Commercial Tying – only arcade
4. Imposing restrictions on the company imposes a regulation to
lease or contract for sale or trade its tenants that they use its
of goods or services laundry company
5. Making supply of particular
goods or services dependent 4. Price discrimination - A
upon the purchase of other goods dominant firm sets different prices
or services from the supplier or conditions for equivalent
which have no direct connection transactions.
with the main goods or services
6. Directly or indirectly imposing 5. Exclusive Dealings – agreement
unfairly low purchase prices for that you only supply to a particular
goods and services of bakeshop and no one else
marginalized sectors
7. Directly or indirectly imposing 6. Tying and Bundling – in selling a
unfair purchase or selling price nail gun, a particular company will
on their competitors, customers, require that only a certain nail will
suppliers or consumers be used.
8. Limiting production, markets or
technical development to the 7. Abuse of Monopsony Buying
prejudice of consumers Power – imposing low prices for
goods and services to the
How do firms abuse their dominant marginalized sectors but imposing
position? high prices for middle class sector
 Module 5 - Philippine Competition Act | Atty. Amago

8. Excessive Pricing / c. Prohibited Mergers and

Exploitative behavior towards Acquisitions
consumers, customers, or
competitors - A dominant firm - Merger or acquisition agreements
charges excessive or unfair prices, that substantially prevent,
or employs other unfair trading restrict, or lessen competition in
conditions. the relevant market or in the
market for goods or services.
9. Output Restriction / Limiting - Mergers and Acquisition are not illegal
production, markets, or but they are subject to the review of
technical development - A the PCA
dominant firm restricts output or - Review is either motu proprio or
refuses to supply, or restricts compulsory!
access to/use of/ development of
a new technology, to the
detriment of consumers.

TN: It is not illegal to be dominant

provided businesses do not abuse their
dominance.

- nothing in this Act 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, restrict or lessen
competition

- any conduct which contributes to

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

- the provisions shall not constrain Compulsory Notification (Sec. 17)

the Commission or the relevant
regulator from pursuing - Notification Threshold: Size of party
measures that would promote fair and Size of Transaction
competition or more competition as - Effective March 2020:
provided in this Act. o size of party - 6 billion
o size of transaction - 2.4 billion
TAKE NOTE: SECTION 41. Basic Necessities - If the parties and the transaction/s
and Prime Commodities. — If the violation are deemed to be under the
involves the trade or movement of basic threshold, there is a prohibition from
necessities and prime commodities as defined by consummating their argument until
Republic Act No. 7581, as amended, the fine 30 days after providing
imposed by the Commission or the courts, as the notification to the commission.
case may be, shall be tripled. - The period may be extended up to 60
days but not more than 90 days if the
Commission deems it necessary to
request further information.
- If the period given expires without
any action, the merger or acquisition
shall be deemed approved and the
 Module 5 - Philippine Competition Act | Atty. Amago

parties may proceed to implement

or consummate it.
- an entity shall not be prohibited from
TN: Merger of financial institutions should continuing to own and hold the stock
always have a favorable recommendation or other share capital or assets of
by the appropriate government agency another corporation
under the Corporation Code. - acquisition of the stock or other share
- This favorable recommendation by a capital of one or more corporations
gov. agency with a competition solely for investment and not used for
mandate shall give rise to a voting or exercising control shall not
disputable presumption that the be prohibited
proposed merger/acquisition is
not violative of this act. TN:
- the burden of proof under Sec. 21
EFFECT OF VIOLATION: agreement will lies with the parties seeking
be considered void and subject the exemption.
parties to an administrative fine of 1% to - Final favorable ruling from the
5% of the value of the transaction. commission may not be
challenged under this act except
If the Merger/Acquisition is when there is fraud or false
determined to be prohibited, the material information.
commission may:
1. Prohibit implementation of the
agreement;
2. Prohibit implementation unless
and until it is modified by changes
specified by the commission;
3. Prohibit implementation unless
and until the pertinent party or
parties enter into legally
enforceable agreements specified
by the commission.

NOTIFYING PARTIES (Sec. 2)

IV. The Relevant Market

THE FOLLOWING FACTORS, among

others, affecting the substitutability
among goods or services constituting
such market, and the geographic area
delineating the boundaries of the market
shall be considered:

a) The possibilities of substituting the

goods or services in question with
others of domestic or foreign origin,
d. Exception (Sec. 21) considering the technological
possibilities, the extent to which
substitutes are available to consumers
and the time required for such
substitution;
b) The cost of distribution of the good
or service, its raw materials, its
supplements and substitutes from
other areas and abroad, considering
freight, insurance, import duties, and
non-tariff restrictions; the restrictions
imposed by economic agents or by
their associations; and the time
 Module 5 - Philippine Competition Act | Atty. Amago

required to supply the market from those prices unilaterally or to restrict supply
areas; in the relevant market;
c) The cost and probability of users or b) The existence of barriers to entry and the
consumers seeking other markets; and elements which could foreseeably alter
d) National, local or international restrictions both said barriers and the supply from
which limit the access by users or competitors;
consumers to alternate sources of c) The existence and power of its
supply or the access of suppliers to competitors;
alternate consumers. d) The possibility of access by its
competitors or other entities to its
V. Control or Dominance of Market sources of inputs;
e) The power of its customers to switch to
CONTROL other goods or services;
- There is presumption that control f) Its recent conducts; and
exists when the parent owns directly g) Other criteria established
or indirectly, through subsidiaries,
more than ½ of the voting power. VI. Forbearance by PCC
- BUT it need not be a certain - Commission, motu proprio or upon
percentage! So, a purchase or application, prior to its initiation of an
ownership of less than 50% equity of inquiry, may forbear from applying
the company does not necessarily the provisions of the Act or these
mean that there’s no control. Rules, for a limited time, in whole or
- There may be a control or internal in part, in all or specific cases, on an
policy in the corporation that entitles entity or group of entities, if in its
control to an entity determination:
- The ability to govern the financial and
operational aspect of the corporation (a) Enforcement is not necessary to
would also mean control the attainment of the policy
objectives of this Act;
EX of control despite owning less than ½ of (b) Forbearance will neither impede
shareholding: competition in the market where
the entity or group of entities
a) Power to direct/govern the financial seeking exemption operates nor in
and operating policies under a statute related markets;
or agreement; (c) Forbearance is consistent with
b) Power to appoint or remove the public interest and the benefit and
majority of the members of the board welfare of the consumers; and
of directors; (d) Forbearance is justified in economic
c) Power to cast the majority of votes at terms;
meetings of the BOD;
d) Ownership over or the right to use all TN: forbearance will be granted for a
or significant part of the assets of the maximum period of 1 year! May be
entity; extended upon the approval of the
e) Rights or contract which confer commission but extension cannot be
decisive influence on the decision of more than a year.
the entity
PUBLIC HEARING
- May be held to assist the commission
DOMINANCE OF MARKET in making determination
- Can exist on the part of one entity - Forbearance shall be made public
(single dominance) or two or more - If the basis of the exemption order
entities (collective dominance) ceases to be valid, the order may be
- There is rebuttable presumption if the withdrawn by the commission.
market share of an entity is at least
50%

FACTORS:

a) The share of the entity in the relevant

market and whether it is able to fix
 Module 5 - Philippine Competition Act | Atty. Amago

CASES: fruits that it is only to a limited extent

interchangeable with them and is only exposed to
1. United Brands v Commission Case
their competition in a way that is hardly
perceptible”
FACTS: UB was the main supplier of bananas in
Europe, using mainly the Chiquita brand. UBC 2. Hoffmann-La Roche & Co. v Commission
forbade its distributors/ripeners to sell bananas Case
that UBC did not supply. Also, UBC fixed pricing
each week; charging a higher price in different FACTS: The commission held that La Roche was
in breach of art 102 TFEU by entering into
Member States, and imposed unfair prices upon agreements with other undertakings which
customers in Belgo-Luxembourg Economic Union, requested them to purchase their vitamins
Denmark, The Netherlands and Germany.[3] exclusively from them. Hoffman disagreed and
claimed they were not dominant as they only had
The Commission viewed United Brands' action as a 43% market share. Thus, they appealed to the
ECJ and asked if the commission had erred in
a breach of Article 86 of the Treaty of Rome (now their interpretation of art 102 TFEU
Art 102 of the TFEU).[4] Article 86 prohibits "abuse
of a dominant position" of a relevant market. The ISSUE: Had the commission erred in their
case was referred for a Preliminary Ruling to the interpretation of art 102 TFEU?
European Court of Justice under Article 177 (now
HELD: Yes. ‘…the view may be legitimately taken
Art 267). that very large shares are in themselves, and
save in exceptional circumstances, evidence of
RULING: Agreeing with the Commission, the ECJ the existence of a dominant position. An
held that United Brands' behavior was unlawful: undertaking which has a very large market share
and holds it for some time … is by virtue of that
share in a position of strength.’ As the
- The ECJ rejected UBC's claim that the commission could not prove other factors that
product market was the "fresh-fruit suggested La Roche was dominant, the courts
market as a whole". Instead, because held that the 43% was insufficient.
of the notion of cross elasticity of
The European Law, similarly to most competition
demand and product characteristics,
laws, does not itself contain a definition of abuse
the product market was defined as the of a dominant position. However, in Hoffmann-
banana market. La Roche & Co. AG v Commission of the
- UBC had about 45% of the EU banana European Communities, it was observed that:
market, and 45% was deemed to ‘The concept of abuse is an objective
concept relating to the behavior of an
amount to a "dominant position". undertaking in a dominant position which is
- Since the "green banana clause" such as to influence the structure of a
effectively prevented any competing market where, as a result of the very
logistics firms from carrying Chiquita presence of the undertaking in question,
the degree of competition is weakened and
bananas, it was anti-competitive and in
which, through recourse to methods
breach of Art 86. different from those which condition
normal competition in products or services
The commission defined the relevant product on the basis of the transactions of
market as Bananas. They argued that commission commercial operators, has the effect of
hindering the maintenance of the degree of
had wrongly defined the relevant market. UB
competition still existing in the market or the
argued that relevant market was not bananas, but growth of that competition.
fresh fruit in general. In response, COURT: held
that essential issue here to define market was 3. Commercial Solvents v Commission
Interchangeability and Court said: “For the banana
*Refusal to supply an existing customer
market to be regarded as forming a market which
- Concerning termination of an existing customer
is sufficiently differentiated from the other fruit the term refusal includes a constructive refusal,
markets it must be possible for it to be singled out for example, the charge of unreasonable prices
by such special factors distinguishing it from other or the imposition of unfair trading conditions for
 Module 5 - Philippine Competition Act | Atty. Amago

the supply in question or the treatment of a sales from Spain and France to the UK, but it
particular customer in a discriminatory manner. denied that the policy was implemented through
any agreement.
The first European case involving a refusal to
supply was Commercial Solvents v Commission RULING: The ECJ held that Bayer had not
in 1974. The Commission decided that abuse of acted unlawfully, because it had simply
dominant position existed since refusal to supply made a unilateral decision. To say that this
would eliminate Zoja (the competitor) from the was the same as an agreement would be to
downstream market. The ECJ upheld the confuse (what is now) TFEU article 101 on
Commission’s decision and held that refusal to collusion, with article 102 on abuse of monopoly
supply could amount to an abuse of dominant power. This was real unilateral behavior. No
position in certain circumstances. According to tacit agreement.
the ECJ:
Findings of the Court
[para25] “…an undertaking which has a
dominant position in the market in raw 96. It does not appear from the judgment under
material and which with the object of appeal that the Court of First Instance took the
reserving such raw material for view that an agreement within the meaning of
manufacturing its own derivatives, refuses Article 85(1) of the Treaty could not exist
to supply a customer, which is itself a unless one business partner demands a
manufacturer of these derivatives, and particular line of conduct from the other.
therefore risks eliminating all competition
on the part of this customer, is abusing its 97. On the contrary, in paragraph 69 of the
dominant position”. judgment under appeal, the Court of First
Instance set out from the principle that the
This case is important because it was not the concept of an agreement within the meaning of
‘mere’ refusal to supply that infringed Article 82 Article 85(1) of the Treaty centres around the
but the refusal which ‘would amount to eliminate existence of a concurrence of wills between
one of the principal manufacturers in the at least two parties, the form in which it is
common market’. The requirement is not the manifested being unimportant so long as it
elimination of all competition but only of constitutes the faithful expression of the
one. However, the Court did not consider parties' intention. The Court further recalled,
whether the Commercial Solvent’s strategy could in paragraph 67 of the same judgment, that for
produce efficiencies and there was no discussion there to be an agreement within the meaning of
in the judgment about the possible benefits to Article 85(1) of the Treaty it is sufficient that
the consumer. It appears that the competition the undertakings in question should have
authorities try to protect the situation of the expressed their common intention to
‘small’ competitor and so it might have been conduct themselves on the market in a
significant that Zoja was a small Italian firm specific way.

4. Bayer v Commission (Export Ban/Parallel 100. Concerning the appellants' arguments that
Imports) Case the Court of First Instance should have
acknowledged that the manifestation of Bayer's
FACTS: Bayer AG, the parent of one of the intention to restrict parallel imports could
largest European chemical and pharmaceutical constitute the basis of an agreement prohibited
groups, manufactured Adalat, used to treat by Article 85(1) of the Treaty, it is true that the
cardio-vascular disease. It was sold by wholly existence of an agreement within the meaning of
owned subsidiaries in different member states. that provision can be deduced from the conduct
National health authorities fix prices for of the parties concerned.
medicines, and the Spanish and French prices
were fixed at a rate 40 per cent lower than UK 101. However, such an agreement cannot be
prices. Wholesalers were buying Adalat in Spain based on what is only the expression of a
and France and importing it to the UK, meaning unilateral policy of one of the contracting parties,
that Bayer UK was at a loss. Bayer changed its which can be put into effect without the
delivery policy, so that it did not fulfil all large assistance of others. To hold that an
orders placed by Spain and France. agreement prohibited by Article 85(1) of
the Treaty may be established simply on the
The Commission found that Bayer France and basis of the expression of a unilateral policy
Bayer Spain had made an agreement with aimed at preventing parallel imports would
wholesalers, which amounted to an unlawful have the effect of confusing the scope of
export ban. Bayer argued that it was restricting
 Module 5 - Philippine Competition Act | Atty. Amago

that provision with that of Article 86[2] of further found that the enterprises eliminated the
the Treaty. risk of independent change thus temporarily
eliminating competitive market conditions. The
102. For an agreement within the meaning of dyestuffs manufacturers claimed that the
Article 85(1) of the Treaty to be capable of being uniformity of the price increases resulted from
regarded as having been concluded by tacit the presence of a price leader in an oligopolistic
acceptance, it is necessary that the market. The European Court conducted a market
manifestation of the wish of one of the analysis to ascertain whether the dyestuffs
contracting parties to achieve an anti- manufacturers' claim could be sustained and
competitive goal constitute an invitation to concluded that the dyestuffs manufacturers
the other party, whether express or engaged in a concerted practice in violation of
implied, to fulfil that goal jointly, and that article 85(1). The European Court reasoned that
applies all the more where, as in this case, since the dyestuffs market was not an oligopoly,
such an agreement is not at first sight in the it was unlikely that three simultaneous price
interests of the other party, namely the increases could have come about spontaneously
wholesalers. on all the national markets.

103. Therefore, the Court of First Instance The similarities in rates, timing, and range of
was right to examine whether Bayer's products affected by the three price increases
conduct supported the conclusion that the indicated a cooperation between the enterprises
latter had required of the wholesalers, as a to eliminate the risks of competition. Imperial
condition of their future contractual Chemical demonstrates that a business
relations, that they should comply with its participates in a concerted practice when it
new commercial policy. intentionally cooperates with alleged competitors
in order to eliminate the risks of free competition
5. ICI v Commission (Dyestuffs) Case in the Community.

FACTS: Ten dyestuff producers and distributors The European Court explained that the concept
were fined for a violation of art 101. They had of a concerted practice does not necessarily
uniformly increased their price in 1964, 1965, involve a formal agreement but can result from
1967. Before they increased their price in 1967, a cooperation between businesses manifested by
representatives of the undertakings met up. One their parallel conduct. Parallel conduct per se
of the representatives made its intention clear to cannot be considered a concerted practice but is
increase prices for soluble dyestuff based on suggestive of one if it leads to abnormal
aniline before the end of 1967. 2 other competitive market conditions. The European
representations insinuated that they are also Court seemed to define a concerted practice
considering increasing their price as well. as parallel conduct which eliminates normal
Following that meeting, there was a general competition and does not arise
uniform increase in the price of the goods. The spontaneously under normal market
commission argued that their actions were conditions, but results from intentional
clearly concerted practice. cooperation between alleged competitors.
Thus, Imperial Chemical established parallel
ISSUE: Whether the dyestuffs manufacturers' conduct, distorted competition, and intentional
practice of publicly announcing their intention to cooperation as the three constitutive elements of
increase prices at a future date and subsequently a concerted practice.
increasing prices simultaneously constituted a
concerted practice under article 85(1) of the EEC 6. A Ahlstrom Osakeyhtio and others v
Treaty? Commission (Wood Pulp II) Joined Cases C-
89, 104, 114, 116, 117, 125, 129/85
HELD: YES. The ECJ upheld the decision. They
stated that CP is a “form of coordination between FACTS: Forty-one non-EC producers of bleached
undertakings which, without having reached the sulfate wood pulp, together with two non-EC
stage where an agreement properly so-called trade associations, one U.S. and the other
has been concluded, knowingly substitutes Finnish, brought actions in the European Court of
practical cooperation between them for the risks Justice to annul a decision of the EC Commission.
of competition.” The commission had imposed substantial fines
on the applicants for violating EC competition
The European Court found that three uniform law. Most of the applicants challenged the power
price increases in the dyestuffs market of the Community to apply its competition law
constituted a progressive cooperation extraterritorially to reach them, and, considering
between the enterprises. The European Court the importance of the issue, the Court first heard
 Module 5 - Philippine Competition Act | Atty. Amago

and decided submissions limited to the between the extremes of jurisdiction based
jurisdictional question. The Commission had purely on territoriality and that based purely on
determined that the producers and the effects.
trade associations had engaged in
concerted practices to fix the price of wood 7. Consten & Grundig v Commission
pulp in violation of article 85(1) of the EEC (Distribution Agreement) Joined Cases 56 and
Treaty. Article 85(1) prohibits agreements and 58/64
concerted practices "which may affect trade
between Member States and which have as their FACTS: Grundig GmbH contracted to distribute
object or effect the prevention, restriction or its electronic goods in France, appointing
distortion of competition within the common appointed Consten SaRL as its exclusive
market." distributor. Grundig guaranteed that no other
wholesaler would be allowed to distribute in
RULING: In their submissions to the Court, the France, and that, for the purposes of the
industry applicants argued principally that the distribution of Grundig products, Consten was
Commission did not have extraterritorial given sole authorization to use the Grundig name
authority over the conduct of foreign persons and emblems which are registered in Germany
that engaged in no wood pulp production in the and in other Member States.
EC, did not maintain offices or subsidiaries within
the EC, and entered into no concerted A third-party company, UNEF, bought Grundig
agreements with the EC. By focusing on the lack products in Germany and began distributing
of any direct territorial connection between "grey imports" into France, whereupon Consten
themselves and the Community, the industry and Grundig sought to prevent UNEF from doing
sought to invoke the stricter versions of the so, claiming, inter alia, that UNEF was abusing
territoriality principle of jurisdiction. Grundig's copyright in its own trade name and
logos.
The Court rejected these arguments, concluding
first that nothing in article 85 itself precludes its The Commission viewed Consten's and Grundig's
application to persons situated outside the action against UNEF as an unlawful breach of
Community. The Court reasoned that the Article 85 of the Treaty of Rome (now Art 101 of
concerted practices of the applicants satisfied the TFEU), as it was important to ensure that
the wording of article 85(1): The practices had competing parallel imports from one state to
the object and effect of restricting another were unhindered. The case was referred
competition in the Common Market because for a Preliminary Ruling to the European Court of
they coordinated the prices charged to Justice under Article 177.
customers in the Community.
RULING: Agreeing with the Commission, the ECJ
The Court next concluded that the Commission's held that the agreement was unlawful. It
decision was compatible with the territoriality rejected the argument that allowing exclusive
principle as universally recognized in public distributorships protected a distributor's
international law. The Court reasoned that: "an legitimate interest, by hypothetically preventing
infringement of article 85, such as the conclusion competitors (once the costs for initial market
of an agreement which has had the effect of penetration had been spent) from free riding on
restricting competition within the Common the investment of advertising and marketing
Market, consists of conduct made up of two initially by the distributor, and then undercutting
elements: the formation of an agreement, prices.
decision or concerted practice and the
implementation thereof." The Court could not 8. [...] An agreement between producer and
accept that the Community had jurisdiction only distributor which might tend to restore the
if the challenged conduct originated within the national divisions in trade between Member
EC: "If the applicability of prohibitions laid down States might be such as to frustrate the
under competition law were made to depend on most fundamental objectives of the
the place where the agreement . . . was formed, Community. The Treaty, whose preamble and
the result would obviously be to give content aim at abolishing the barriers
undertakings an easy means of evading those between States, and which in several
prohibitions." provisions gives evidence of a stern attitude with
regard to their reappearance, could not allow
The standard adopted by Wood Pulp, requiring undertakings to reconstruct such barriers.
an intent or direct effect of restricting EC
competition following from conduct implemented
within the EC, attempts to strike a balance
 Module 5 - Philippine Competition Act | Atty. Amago

8. Groupement des Cartes Bancaires v proving that the conduct has actual detrimental
Commission (Payment Card Scheme) Case C- effects on the market.
67/13 P Court of Justice
In its analysis of the errors of law
FACTS: CB Group was founded by the main committed by the GC, the ECJ concluded
banks active in France to ensure the that the GC had failed to properly ascertain
interoperability of the systems for payment and whether the CB Group measures in
withdrawal by bank cards issued by its members themselves revealed such a sufficient
(the CB system). This system allows the use of degree of harm to competition. The ECJ
bank cards issued by CB Group members rejected the GC’s view that the concept of ‘by
(issuing side) for payments to all affiliated object’ restrictions should not be interpreted
merchants and for the withdrawal from ATMs restrictively since ‘otherwise the Commission
controlled by any of the CB Group members would be exempted from the obligation to prove
(acquiring side). The disputed measures the actual effects on the market of agreements
consisted of certain fees to be paid by CB which are in no way established to be, by their
Group members depending on their card very nature, harmful to the proper function- ing
issuing/acquisition of merchants ratio, to of normal competition’. The ECJ held that the
attempt to solve a free-riding problem on GC had erred in taking the view that a
the issuing side. restrictive object of the measures could be
inferred from the wording alone and the
The CB Group notified the measures to the mere possibility that the measures may
Commission in 2002 (under Regulation 17/62). restrict competition.
Five years later, the Commission adopted an
infringement decision finding that the 9. Tate & Lyle plc and others v Commission
purpose of the measures was to keep the Joined Cases T-202, 204, 207/98 General Court
price of payment cards artificially high to [2001] ECR II-2035
the advantage of the major banks of the CB
Group and to the detriment of new entrants. 1. The fact that only one of the participants
CB Group brought an appeal against the at the meetings between competing
Commission decision before the GC. In its 2012 undertakings reveals its intentions is not
judgment, the GC upheld the decision finding sufficient to exclude the possibility of an
that the pricing measures indeed agreement or concerted practice. The criteria
constituted restrictions of competition ‘by of coordination and cooperation laid down by the
object’. CB Group filed an appeal before the ECJ case-law on restrictive practices, far from
arguing, inter alia, that the GC erred in law in requiring the working out of an actual plan, must
applying the concept of restriction of competition be understood in the light of the concept inherent
‘by object’. in the provisions of the Treaty relating to
competition that each economic operator must
RULING: In line with Advocate General Wahl’s determine independently the policy which he
opinion, the ECJ upheld the appeal, set aside the intends to adopt on the common market.
GC’s judgment, and referred the case back to the
GC to examine whether the measures at issue Although it is correct to say that that
could be prohibited on account of their requirement of independence does not deprive
anticompetitive effects. economic operators of the right to adapt
intelligently to the existing and anticipated
Article 101(1) TFEU prohibits agreements that conduct of their competitors, it does however
have as their ‘object or effect’ the restriction of strictly preclude any direct or indirect contact
competition. If it is revealed that an agreement between such operators, the object or effect
has an anticompetitive object, anticompetitive whereof is either to influence the conduct on the
effects are presumed and there is no need to market of an actual or potential competitor or to
show the actual detrimental effects of the disclose to such a competitor the course of
allegedly anticompetitive conduct on the market. conduct which they themselves have decided to
The ECJ initially recalled its well-known case law adopt or contemplate adopting on the market.
according to which ‘by object’ restrictions of
competition are those that are regarded, by their 2. The finding that an undertaking, by its
very nature, as being harmful to the proper participation in a meeting with an anti-
functioning of normal competi- tion. It clarified competitive purpose, not only pursued the aim
that accordingly, only where conduct reveals a of eliminating in advance uncertainty about the
‘sufficient degree of harm’, such as in a price- future conduct of its competitors but could not
fixing cartel, is the Commission exempted from fail to take into account, directly or indirectly, the
information obtained in the course of those
 Module 5 - Philippine Competition Act | Atty. Amago

meetings in order to determine the policy which having the object or effect of restricting
it intended to pursue on the market, is also valid competition within the meaning of article 85 (1)
where the participation of one or more of the EEC treaty.
undertakings in meetings with an anti-
competitive purpose does not consist of the 11. RTE & ITP v Commission (The Magill
exchange of information but is limited to the Case) Joined Cases
mere receipt of information concerning the
future conduct of their market competitors. At long last the European Court of Justice has
published its decision in the case on refusals to
3. For the purposes of applying Article 85(1) of license intellectual property rights, known as
the Treaty (now Article 81(1) EC), there is no Magill. Although the Court held that the refusal
need to take account of the concrete effects to license copyright and lists of television
of an agreement when it is apparent that it programmes was an abuse of a dominant
has as its object the prevention, restriction position, the judgement still leaves questions
or distortion of competition within the unanswered.
common market.
FACTS: Most homes in the Republic of Ireland
4. For an agreement between undertakings or a and around two-fifths of Northern Irish homes
concerted practice to be capable of affecting are able to receive television programmes
trade between Member States, it must be broadcast by the Irish State Broadcaster (RTE),
possible to foresee with a sufficient degree ITV and the BBC. Under United Kingdom and
of probability and on the basis of objective Irish copyright law, the BBC, ITV (acting through
factors of law or fact that it may have an a subsidiary, Independent Television
influence, direct or indirect, actual or Publications Limited ("ITP")) and RTE own the
potential, on the pattern of trade between copyright in their lists of television programmes.
Member States, such as might prejudice the These three broadcasters provided their
realization of the aim of a single market between programme schedules free of charge to daily and
the Member States. Accordingly, it is not periodical newspapers but until 1985 there was
necessary that the conduct in question should in no comprehensive weekly listing guide. In 1985
fact have substantially affected trade between Mr. Magill decided to produce an Irish guide to
Member States. It is sufficient to establish that all channels and complained to the European
the conduct is capable of having such an effect. Commission when the three broadcasters
refused to license him to reproduce their weekly
5. The fact that a cartel relates only to the listings. His complaint in April 1986 sought a
marketing of products in a single Member State declaration that the three broadcasters were
is not sufficient to exclude the possibility that abusing their dominant positions by
trade between Member States might be affected. refusing to grant licences for the
Since the market concerned is susceptible to publication of their weekly listings and the
imports, the members of a national price cartel Commission decided that there was a
can retain their market share only if they defend breach of Article 86 of the Treaty of Rome.
themselves against foreign competition.
RULING: The ECJ upheld both the Commission's
10. ETA Fabriques d'Ebauches v SA DK and the Court of First Instance's view that the
Investment and others Case 31/85 Court of refusal by television companies to permit
Justice [1985] ECR 3933 publication of their listings was a breach of
Article 86 and prevented publication of
The partitioning of the markets brought about by comprehensive listings for which consumer
a distribution network under which every dealer demand existed.
is granted an exclusive right to distribute a
product within the territory allotted to him and is The Magill decision is of great importance to
prohibited from supplying the product outside owners of Intellectual Property Rights - not just
that territory constitutes a restriction of copyright but patents, designs and trademarks
competition within the meaning of article as well. Intellectual property rights protect their
85 (1) of the EEC treaty . owners' creative or research investment against
third parties and rights of this nature are
A guarantee scheme under which a supplier of normally regarded as allowing their holders
goods limits the guarantee to customers of his complete discretion as to whether or not to
exclusive distributor places the latter and the license their rights.
retailers to whom he sells in a privileged
position as against parallel importers and The importance of Article 86 of the Treaty of
distributors and must therefore be regarded as Rome is clearly underlined by the Magill
 Module 5 - Philippine Competition Act | Atty. Amago

judgement and it is a matter of concern to indispensable to business in that downstream

holders of intellectual property rights that a market, in that there would be no actual or
refusal to license, even though there may potential substitute in existence for it.
be no classically abusive behaviour such as
price fixing, may infringe Article 86. The ECJ then proceeded to state that these
Although the ECJ has confirmed that the conditions were not met in this case, as
principles in Magill will apply only in exceptional newspapers can be (and are in practice)
circumstances, it is likely that the judgement will distributed by post or through sale in shops
lead to further challenges to holders of and at kiosks. It also stated that, to show that
intellectual property rights who refuse to license the home-delivery scheme was indispensable, it
third parties in particular in the field of was not enough to argue as the complainant had
computers and telecommunications. done that it was not economically viable to set
up his own scheme by reason of his small
*258 The ECJ held that there was a clear circulation, but that the complainant must at
dominant position with respect to the least show that it was “not economically viable
information used to compile the listings. It then to create a second home-delivery scheme for the
held that the refusal to license the listings distribution of daily newspapers with a
was an abuse as it prevented the circulation comparable to that of the daily
appearance of a new product, that the newspapers distributed by the existing scheme.”
refusal was not justified and that as a
consequence the companies reserved to 13. IMS Health GmbH & Co. OHG v NDC
themselves the secondary market of weekly Health GmbH KG C-418/01 Court of Justice
television guides. [2000] ECR I-5039
http://curia.europa.eu/juris/document/docume
12. Oscar Bronner GmbH Co. KG v nt.jsf?text=&docid=49
Mediaprint 104&pageIndex=0&doclang=EN&mode=lst&dir
=&occ=first&part=1&ci d=12555215
FACTS: One large Austrian newspaper group
refused to include another newspaper in its FACTS: IMS Health is the world's largest supplier
national home delivery service. The smaller of information on sales and the prescription of
publisher brought an action under paragraph 35 pharmaceutical products and had developed a
of the federal competition legislation, which is successful system, the "1860 brick structure",
analogous in content to Article 82, and the for compiling this information which was
Austrian court referred the case to the ECJ to protected by copyright.
determine whether the refusal might constitute
an abuse of a dominant position under Article 82. NDC and AzyX tried to market a similar
system but this failed as the brick structure
RULING: The ECJ held that it was for the devised by IMS had become the industry
national court to determine the relevant standard for those carrying out analysis of
market, considering “inter alia, whether home- the German pharmaceutical markets. NDC
delivery schemes constitute a separate market, asked IMS for a license to use the 1860 brick
or whether other methods of distributing daily structure which was refused.
newspapers, such as sale in shops or at kiosks or
delivery by post, are sufficiently interchangeable IMS brought an action before the local courts in
with them to have to be taken into account also”. Germany alleging that NDC's data collection
The national court should then consider whether system had infringed IMS's copyright. The
the possibility of regional home-delivery German court decided in favour of IMS, ruling
schemes would prevent a finding of dominance. that its 1860 brick structure system for data
If the national court found such a separate collection was protected by copyright. However,
market and that there would be an the national court considered that IMS
insufficient degree of interchangeability could not refuse to grant a licence to NDC if
with regional schemes, the large group that refusal constituted an abuse of a
would be in a de facto monopoly position on dominant position under EC law.
this market and so dominant.
The German court referred a number of
Then the ECJ turned to the question of abuse, questions to the ECJ on the circumstances under
where (based largely on Magill ) it said that for which such behaviour constitutes an abuse of a
there to be an abuse the refusal would have to dominant position.
(a) be likely to eliminate all competition in the RULING: The exclusive right to reproduction
downstream market by the person refused, (b) forms part of the copyright-holder's rights, so
be incapable of objective justification, and (c) be that a refusal of a license cannot, in itself,
 Module 5 - Philippine Competition Act | Atty. Amago

constitute an abuse of a dominant position. addition to the previous penalties, which

Nevertheless, the exercise of an exclusive included 120 days to divulge the server
right may, in exceptional circumstances, information and 90 days to produce a version of
give rise to abusive conduct. The ECJ ruled Windows without Windows Media Player.
that where a copyright holder refuses to give
access to a product or service indispensable to The first of two types of conduct by Microsoft that
carrying on business this will only be considered was censured by the European Commission was
an abuse where: the company’s refusal to supply competitors with
“interoperability information” and to authorise
o The undertaking which requested the them to use such information to develop and
licence intends to offer new products or distribute products competing with its own
services not offered by the owner of the products on the workgroup server operating
copyright and for which there is a system (OS) market (i.e., file, print, group, and
potential consumer demand. user administration services). The Commission
o The refusal cannot be justified by found that this refusal resulted in the
objective considerations. foreclosure of competitors from the server
o The refusal is such as to reserve to the OS market and ordered Microsoft to
undertaking which owns the copyright the disclose details of its client/server and
relevant market by eliminating all server/server communication protocols to
competition in that market. any parties interested in developing and
distributing workgroup server operating
The ECJ has restated the existing law that only systems.
in "exceptional circumstances" will an intellectual
property right owner in a dominant position be Addressing the second type of potentially
required to grant a license of that property. The anticompetitive conduct by Microsoft, the
conditions to be fulfilled for an abuse to be found Commission determined that the “tying” of
remain strict, offering some comfort to copyright Windows Media Player to Windows PC OS
owners. It is now for the German court to decide prevented the suppliers of other media
these difficult factual questions. players from gaining comparable access to
consumers’ PCs. Microsoft was consequently
14. Microsoft Corporation v Commission - required to offer a version of Windows without
Tying and Bundling Case Windows Media Player. In addition, Microsoft was
fined EUR 497.2 million in 2004.
FACTS: In 1993, the American software
company Novell claimed that Microsoft was The European Court of First Instance (CFI)
blocking its competitors out of the market upheld the Commission’s decision with the
through anti-competitive practices. The exception of one element – appointing a
complaint centered on the license practices at monitoring trustee to supervise implementation
the time which required royalties from each of the remedies at Microsoft’s expense.
computer sold by a supplier of Microsoft's
operating system, whether or not the unit
actually contained the Windows operating
system. Microsoft reached a settlement in 1994,
ending some of its license practices.

In 1998, Sun Microsystems raised a complaint

about the lack of disclosure of some of the
interfaces to Windows NT. The case widened
when the EU examined how streaming media
technologies were integrated with Windows.

RULING: Citing ongoing abuse by Microsoft, the

EU reached a preliminary decision in the case in
2003 and ordered the company to offer both a
version of Windows without Windows Media
Player and the information necessary for
competing networking software to interact fully
with Windows desktops and servers. In March
2004, the EU ordered Microsoft to pay €497
million ($794 million or £381 million), the largest
fine ever handed out by the EU at the time, in