PHILIPPINE COMPETITION ACT (RA 10667)

What is RA 10667?

AN ACT PROVIDING FOR A NATIONAL COMPETITION POLICY PROHIBITING ANTI-COMPETITIVE AGREEMENTS, ABUSE OF DOMINANT POSITION AND ANTI-COMPETITIVE MERGERS AND ACQUISITIONS, ESTABLISHING THE PHILIPPINE COMPETITION COMMISSION AND APPROPRIATING FUNDS THEREFOR

PCA is enforceable to any person or entity engaged in any trade, industry and commerce in the Republic of the Philippines (T/F)

True

The PCA is applicable to international trade if it has direct, substantial, and reasonably foreseeable effects on trade, industry, or commerce in the Republic of the Philippines (T/F)

True

Acts done outside the Republic of the Philippines cannot be subject to enforcement under PCA.

False

The PCA applies to bargaining agreement between the employee and employer (T/F)

False

It refers to the purchase of securities or assets, through contract or other means, for the purpose of obtaining control by:

(1) One (1) entity of the whole or part of another;

(2) Two (2) or more entities over another; or

(3) One (1) or more entities over one (1) or more entities;

Acquisition

It 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.

Agreement

It refers to any type or form of undertaking, collective recommendation, independent or concerted action or practice, whether formal or informal.

Conduct

It refers to information which concerns or relates to the operations, production, sales, shipments, purchases, transfers, identification of customers, inventories, or amount or source of any income, profits, losses, expenditures

Confidential Business Information

It refers to the ability to substantially influence or direct the actions or decisions of an entity, whether by contract, agency or otherwise

Control

It 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

Dominant position

It refers to any person, natural or juridical, sole proprietorship, partnership, combination or association in any form, whether incorporated or not, domestic or foreign, including those owned or controlled by the government, engaged directly or indirectly in any economic activity

Entity

It refers to the group of goods or services that are sufficiently interchangeable or substitutable and the object of competition, and the geographic area where said goods or services are offered

Market

It refers to the joining of two (2) or more entities into an existing entity or to form a new entity

Merger

It comprises all those goods and/or services which are regarded as interchangeable or substitutable by the consumer or the customer, by reason of the goods and/or services’ characteristics, their prices and their intended use

Relevant product market

It comprises the area in which the entity concerned is involved in the supply and demand of goods and services, in which the conditions of competition are sufficiently homogenous and which can be distinguished from neighboring areas because the conditions of competition are different in those areas.

Relevant Geographic Market

Anti-competitive Agreement:

The following agreements, between or among competitors, are per se prohibited:

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

2. Fixing 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 (bid rigging)

When one or more bidders, usually conspiring together, submit bids that they don't intend to win.

Cover bidding

(Let's say there's an auction for a contract to provide services. Company A and Company B agree to submit bids. Company A wants to win, but Company B doesn't. So, Company B submits a higher bid than Company A, ensuring that Company A wins the contract.)

When competitors agree not to bid or to withdraw bids to give one of them a better chance of winning.

Bid Suppression

(If Company A and Company B are both interested in a contract, they might agree that only Company A will submit a bid, effectively suppressing any competition and ensuring Company A wins without much effort.)

When competitors take turns being the designated winner in different bidding situations.

Bid Rotation

(Suppose there are three companies: A, B, and C. They agree to take turns being the lowest bidder in three different contracts. This way, each company gets a chance to win a contract without worrying about competition.)

When competitors agree to divide markets among themselves rather than compete for the same customers or contracts.

Market Allocation
(Let's say there are two companies, Company X and Company Y, both offering the same product in a city. They might agree that Company X will focus on the eastern part of the city, and Company Y will focus on the western part. This way, they avoid competing directly with each other.)

Anti-Competitive Agreement;

Agreements between or among competitors which have the object or effect of substantially preventing, restricting or lessening 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

Anti-Competitive Agreements

1. Prohibited per se

2. Prohibited as to object

3. Other agreements which are not classified as 1 and 2 but substantially preventing, restricting, or lessening competition

An agreement may not necessarily be deemed a violation of this Act, if the transaction

1. contributes to improving the production or distribution of goods and services or 

2. to promoting technical or economic progress

3. while allowing consumers a fair share of the resulting benefits 

Three Prohibited Acts penalized by PCA

1. Anti-competitive agreements

2. Abuse of dominant position

3. Anti-competitive mergers and acquisitions

Dominant position in the market is prohibited by the PCA (T/F)

False (Abuse of Dominant Position is prohibited)

Abuse of Dominant Position

• Selling below cost to drive out competitors

• Creating barriers that prevent competitors to enter the competition and preventing them to grow

• Making a transaction subject to acceptance by the other parties of other obligations which have no connection with the transaction 

• Setting unfair prices or condition between customers or seller (Discrimination)

• Imposing restrictions on the lease or contract of sale or trade concerning where, to whom the goods or service may be sold or traded.

• Making supply of particular goods or services dependent upon the purchase of other goods or service from the supplier which have no direct connection with the main goods or services to be supplied

• Imposing unfairly low purchase prices for the goods or services from marginalized service providers and producers (predatory pricing)

• Unfairly setting prices for competitors, customers, suppliers. or consumers

• Limiting production or market to harm consumers, suppliers, or competitors

Parties to a merger or acquisition agreement amounting one billion pesos (P1,000,000,000.00) in value are prohibited to consummate their agreement (T/F)

False (exceed)

Parties must provide notification to the Commission in the specified form and containing specified information before consummating a merger or acquisition agreement exceeding one billion pesos (T/F)

True

The Commission may request further information from the parties to an agreement within the initial thirty (30) days of notification, extending the period within which the agreement may not be consummated by an additional sixty (60) days (T/F)

True

If no decision is made by the Commission within the specified period, the merger or acquisition is automatically approved, and the parties can proceed to implement it (T/F)

True

Exemptions from Prohibited Mergers and Acquisitions

1. The benefits outweigh the harm

2. It is the only way to prevent further losses

3. The merger or acquisition is entered into prior to the approval of this Act

4. Solely for investment and not used for voting or exercising control

Who has the burden of proof for exemptions from prohibited mergers and acquisitions?

The parties seeking the exemption

Entities are prohibited from continuing to own and hold the stock or other share capital or assets of another corporation acquired prior to the approval of the PCA (T/F)

False

Acquiring or maintaining market share in a relevant market through means of owning stock or share capital without exercising control and without aiming to restrict competition is not prohibited (T/F)

True

The acquisition of stock or share capital solely for investment purposes, without voting or control, is exempted from the provisions of the PCA (T/F)

True

The amount covered for the compulsory notification to the Commission of the parties to the merger or acquisition agreement

The transaction exceeds P1B

In how many days does the entities merged must notify the PCC

30 days

It refers to the value of assets or revenues of the ultimate parent entity of at least one of the parties.

Size of Person Test

The threshold for Size of Person Test

Exceed P6B

It refers to the value of asset or revenue of the acquired entity

Size of Transaction Test

The threshold of the size of transaction test

P2.4B