Act.
PHILIPPINE COMPETITION ACT-RA 10667 An entity that controls, is controlled by, or is under common control with
DISCUSSION OUTLINE (April 2018)
TITLE OF THE LAW
The title of the law is: “An act providing for a national competition policy
prohibiting ant-competitive agreements, abuse of dominant position and
anti- competitive mergers and acquisitions, establishing the Philippine
Competition Commission and appropriating funds therefor.”
EFFECTIVE DATE OF THE LAW
The effective date of the law is August 8, 2015. The subsequent
implementing rules and regulations went into effect on June 18, 2016
after its publication on June 13, 2016.
PROHIBITED ACTS UNDER THE LAW
1. The prohibited acts under the law are;
(a) Anti-Competitive Agreements under Section 14, and
(b) Abuse of Dominant Position under Section 15.
2. In addition to the prohibited acts, the PCC shall have the
power to review Mergers and Acquisitions that substantially prevent,
restrict or lessen competition in the relevant market or in the market for
goods or services.
3. The ultimate aim of the law is to protect the competitive
process. When competition is eliminated, the competitive process is
brought to an end as competitors are excluded from the market
(exclusionary effect) and consumers are exploited (exploitative effect).
4. On the other hand, the law will permit an agreement or an act
if it has:
(a) efficiency gains, and
(b) consumer benefits.
The agreement or act in this case has the object or effect of “improving
production or distribution of goods and services within the relevant
market, or promoting technical and economic progress, while allowing
consumers a fair share of the economic benefit. This is the rule of
reason or efficiency gains with consumer benefits justification.
ANTI-COMPETITIVE AGREEMENTS
1. The anti-competitive agreements are enumerated under Section
14:
a. 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;
(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;
b. The following agreements, between or among competitors
which have the object or effect of substantially preventing, restricting
or lessening competition shall be prohibited: (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;
c. Agreement other than those specified in (a) and (b) of this
section which have the object or effect of substantially preventing,
restricting or lessening competition shall also be prohibited:
Provided, Those which contribute 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 of this
another entity or entities, have common economic interests, and are not
otherwise able to decide or act independently of each other, shall not be
considered competitors for purposes of this section.
1.1 Anti-competitive acts are those agreements undertaken with
the object or effect of substantially preventing, restricting or lessening
competition. This means that competitors are inhibited from competing, or
from growing, or staying in the market. When these occur, the agreement
is said to have a foreclosure object or effect on competition.
1.2 Foreclosure can be in the horizontal market, where the entity
and its competitors operate, or in the vertical market, the upstream or
vertical market. In this case there is vertical integration. However, there
is no necessity for the entity to have market dominance in both markets.
1.3 There is no need for actual foreclosure to occur as the law
allows intervention even before the act of the entity can have an effect on
the market.
2. Section 14 has three subsections.
Subsections (a) and (b) prohibit while Subsection (c) prohibits
anti- competitive agreements agreements other than those
between or among competitors specified under (a) or (b).
The distinction is material as a while that of Subsection (c) is not.
violation of Subsections (a) and
(b) are criminal in nature
3. To resolve the issue as to whether a: (a) parent company and
a subsidiary, or (b) parent company and an affiliate company, or (c)
subsidiaries or affiliates will be considered as competitors, the law
adopted the single economic entity doctrine which is defined under the
last paragraph of Section 14.
In essence, the entities that are part of the single economic
entity are under the control of the ultimate parent entity.
3.1 The control required being the ability to substantially influence or
direct the actions or decisions of an entity, whether by contract,
agency or otherwise.” Thisis known as “decisive influence.”
Section 25 mandates that the PCC to presume control when: “the parent
owns directly or indirectly, through subsidiaries, more than one half (1/2)
of the voting power of an entity, unless in exceptional circumstances, it
can clearly be demonstrated that such ownership does not constitute
control.”
It can also be presumed even if the entity owns one half (1/2) or less of the
voting power of another entity when:
(a) There is power over more than one half (1/2) of the voting
rights by virtue of an agreement with investors;
(b) There is power to direct or govern the financial and
operating policies of the entity under a statute or agreement;
(c) There is power to appoint or remove the majority of the
members of the board of directors or equivalent governing body;
(d) There is power to cast the majority votes at meetings of the
board of directors or equivalent governing body;
(e) There exists ownership over or the right to use all or a
significant part of the assets of the entity;
(f) There exist rights or contracts which confer decisive
influence on the decision of the entity.
3.2 As a consequence, it must be realized that while affiliated
companies may be shielded from the consequences of their agreements
as they are not competitors, the parent company and related companies
may be bound by the act of a subsidiary or an affiliate if it enters into a
prohibited agreement with a competitor.
3.3 Under Rule 4, Section 2, Par. (b) of the IRR for purposes of
merger control, the reorganization of several legal entities belonging to a
single economic entity will not be covered since there can be no
“acquiring and acquired pre- acquisition ultimate parent entities.”
Consequently, they are not subject to the notification requirement.
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3.4 For purposes of applying Section 15, the single economic
entity shall be considered collectively in relation to the definition of
dominant position, referring to “a position of economic strength that an
entity or entities hold which makes it capable of controlling the relevant
market independently from any combination of the following: competitors,
customers, suppliers or consumers.”
Since a competitor is defined as an entity outside of a single
economic entity. Consequently, a parent company cannot be accused of
impermissible conduct towards its subsidiaries and affiliates.
4. The penal sanction is imprisonment from 2 to 7 years, and a
fine of no less than PHP 50,000,000.00 but not more than PHP
250,000,000.00.
4.1 Administrative penalties will range from PHP 50,000.00 to
2,000,000.00 per violation.
ABUSE OF A DOMINANT POSITION
1. Abuse of Dominant Position is provided for under Section 15:
It shall prohibited for one or more entities to abuse their dominant
position by engaging in conduct that would substantially prevent, restrict
or lessen competition:
(a) Selling goods or services below cost with the object of driving
competition or of the relevant market: Provided, that in the
Commission’s evaluation of this fact, it shall consider whether the entity
or entities have no such object and the price established was in good
faith to meet or compete with the lower price of a competitor in the same
market selling the same or comparable product or service of like quality;
(b) Imposing barriers to entry or committing acts that prevent
competitors from growing within the market in an anti-competitive
manner except those that develop in the market as a result of or
arising from a superior product or process, business acumen, or legal
rights or laws;
(c) Making a transaction subject to acceptance by the other parties
of other obligations which, by their nature or according to commercial
usage, have no connection with the transaction;
(d) Setting prices or other terms or conditions that discriminate
unreasonably between customers or sellers of the same goods or
services, where such customers or sellers are contemporaneously
trading on similar terms and conditions, where the effect may be to
lessen competition substantially: Provided, that the following shall be
considered permissible differentials:
1. Socialized pricing for the less fortunate sector of the economy;
2. Price differential which reasonably or approximately reflect
differences in the cost of manufacture, sale or delivery resulting
from differing methods, technical conditions, or quantities in
which the goods or services are sold or delivered to the buyers or
sellers;
3. Price differential or terms of sale offered in response to the
competitive price of payments, services or changes in the
facilities furnished by a competitor; and
4. Price changes in response to changing market conditions,
marketability of goods or services, or volume:
(e) Imposing restrictions on the lease or contract for sale or trade of
goods or services concerning where, to whom, or in what forms goods or
services may be sold or traded, such as fixing prices, giving preferential
discounts or rebate upon such price, or imposing conditions not to deal
with competing entities, where the object or effect of the restrictions is to
prevent, restrict or lessen competition substantially. Provided, that
nothing contained in this Act shall prohibit or render unlawful:
1. Permissible franchising, licensing, exclusive merchandising or
exclusive distributorship agreements such as those which give
each party the right to unilaterally terminate the agreement; or
2. Agreements protecting intellectual property rights, confidential
information, or trade secrets;
(f) Making supply of particular goods or services dependent upon the
purchase of other goods or services from the supplier which have no
direct connection with the main goods or services to be supplied;
(g) Directly or indirectly imposing unfairly low purchase prices for the
goods or services of, among others, marginalized agricultural producers,
fisherfolk, micro-, small-, medium-scale enterprises, and other
marginalized service providers and producers;
(h) Directly of indirectly imposing unfair purchase or selling price on
their competitors, customers, suppliers or consumers, provided that
prices that develop in the market as a result of or due to a superior
product or process, business acumen or legal rights or laws shall not be
considered unfair prices; and
(i) Limiting production, markets or technical development to the
prejudice of consumers, provided that limitations that develop in the
market as a result of or due to a superior product or process, business
acumen or legal rights or laws shall not be a violation of this Act:
Provided, that 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.
Provided, further, that 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.
Provided, finally, that the foregoing shall not constrain the Commission
or the relevant regulator from pursuing measures that would promote fair
competition or more competition as provided in this Act.
2. What Section 15 forbids is abusive conduct by a coercive
monopolist. These has the following elements:
(a) The entity must have market power or market dominance.
This refers to a situation where the entity has the capacity to control the
market or stop competitors from entering the market. Under Section
27, this can be presumed if the market share of the entity is at least
50% unless a new market threshold is determined by the PCC.
(b) The entity commits abusive conduct.
(c) The conduct must have substantial foreclosure effect on
the relevant market.
(d) There is no objective justification for the conduct.
2.1 Dominant position need not be enjoyed by a single entity. The
law will also be called to apply under the concept of collective dominance.
This is a situation where several entities demonstrate a
collective behavior towards the accomplishment of a particular object
that is prohibited. If they possess the ability to control the relevant market,
the entities will have collective dominance. It must be noted though that
the IRR does not specifically address the matter.
2.2 In an oligopoly, a market dominated by a few entities, there is
diminished competition and it may be normal for oligopolists to have
parallel behavior. This does not translate to ant-competitive behavior by
those enjoying collective dominance unless the behavior is the only
reason for parallel behavior.
2.3 Section 15 does not forbid a monopoly. What it seeks to
address is the abuse of a monopoly as per the qualifying statements in
the quoted section that allows it to maintain and increase market share
through legitimate means that do not substantially prevent, restrict or
lessen competition.
3. Potential abusive conduct as provided by Section 15 are:
(a) Predatory Pricing, which refers to the selling of goods or
services below cost with the object of driving competition out of the
relevant market.
(b) Imposing Barriers to Competition, which refers to barriers
to entry or committing acts that prevent competitors from growing
within the market in an anti-competitive manner.
(c) Bundling or Tying, which refers to a situation where the
consumer is offered two or more products with inducements to take
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 both, rather than separately or where the sale of the second product is
used as a condition for the sale of the first product.
(d) Discriminatory Pricing, which refers to setting prices or
other terms and conditions that discriminate unreasonably between
customers or sellers of the same goods or services,
(e) Restrictive Vertical Agreements, which refers to distribution
and supply agreements providing prima facie restrictive clauses, such
as exclusive dealing, minimum quantity obligations, resale price
maintenance, formal or de facto restriction on parallel trade, and online
sales bans.
Resale Price Maintenance, refers to restrictions on the contract
of sale concerning where, to whom or in what forms goods and
services may be sold or traded such as fixing prices or the giving of
preferential rebates or discounts.
(f) Imposing Unfair Price, which refers to a price that is higher
or lower than what could objectively be justified insofar as its
contract with a marginalized supplier, who is one engaged in a
subsistence activity (i.e farmer) and whose annual net income does
not exceed the NEDA poverty line for his region.
(g) Limiting production, markets or technical development
which results in prejudice to consumers, and is not the result of “a
superior product or process, business acumen, or legal rights or laws.”
REVIEW OF MERGERS AND ACQUISITIONS
1. Section 16 gives the PCC the power to review mergers and
acquisitions based on factors which they deem to be relevant.
2. Section 17 provides for compulsory notification if the
transaction has met the set threshold of PHP 1,000,000,000.00 under the
size of the person test and the size of the transaction test.
2.1 The size of the person test refers to the acquiring or target
entity, at least one of which must have gross annual revenues in, into or
from or assets in the Philippines worth PHP 1,000,000,000.00. This has
been increased to PHP 5,000,000,000.00 under PCC Policy Statement
18-01 effective March 20, 2018.
venture exceeds the threshold.
3. Section 17 requires compulsory notification at least 30 days
prior to the consummation of the transaction. This will have the effect of
prohibiting the parties from consummating the transaction until 30 days
after the PCC was provided notification. This gives the PCC the
opportunity to issue a decision, or if necessary, to request additional
information. In the latter case, the transaction cannot be consummated
for an additional 60 days, beginning on the day the request for additional
information is received. Provided, that in no case shall the total period of
review exceed 90 days from initial notification.
3.1 For creeping transactions, referring to merger or acquisitions
consisting of successive transactions or acquisition of parts of one or
more entities wich shall take place with a 1 year period, it shall be
treated as one transaction. Notification must be on the basis of the
preliminary binding agreement, or if none, when the parties execute the
agreement relating to the last transaction which, when taken together
with the preceding transactions, satisfies the threshold.
4. If there is a failure to give notification, the law will impose an
administrative fine ranging from 1% to 5% of the transaction value. This
may also result in gun- jumping or premature consummation of the
transaction without the requisite clearance from the PCC.
5. The PCC can permit an otherwise prohibited merger or
acquisition under a rule of reason and/or white knight justification. The
former holds that the M & A has brought about or is likely to bring about
gains in efficiencies that are greater than the effects of any limitation on
competition, while the latter is a situation where a party is faced with
actual or imminent financial failure and the agreement is represents the
least competitive arrangement among known alternative uses for the
failing entity’s assets.
6. A favorable ruling acquires a no-look back protection as the
PCC ruling cannot be challenged or reversed by the PCC except when it
is obtained through fraud or false material information.

2.2 The size of the transaction test refers to object of transaction

and must be worth PHP 2,000,000,000.00 as likewise revised under PVV
Policy Statement 18-01.

2.3 In case of acquisitions, to include de facto mergers or

consolidations, compliance with the size of the transaction test will
require an inquiry as to the place of the subject assets, as:
(a) where all the subject assets are in the Philippines, the
gross annual revenues or value of assets must meet the threshold,
(b) where all the subject assets are outside of the Philippines,
the gross annual revenues of such assets generated in or into the
Philippines and the value of assets in the Philippines of the acquiring
entity must meet the threshold, and
(c) where some of the subject assets are inside and some are
outside the Philippines, the gross annual revenues generated in or
into the Philippines by assets acquired in the Philippines and assets
acquired outside of the Philippines must collectively meet the
threshold and the value of assets in the Philippines of the acquiring
entity must similarly meet the threshold.

2.4 In statutory mergers or consolidations, the size of the

transaction test requires that the enterprise value test and the control
test be hurdled.
In the enterprise value test, the gross annual revenues from
sales in, into or from the Philippines or the value of the assets in the
Philippines must meet the threshold. In the control test, the acquiring
entity must directly or indirectly gain control or further control of the
subject enterprise. Both are subject to separate notifications.

2.5 In case of a joint venture, the contributing entities are deemed

acquiring entities and the joint venture the acquired entity.
Under Rule 4, Section 3, Par. (d), the acquiring entity in the
transaction will be subject to notification if either:

(a) the aggregate value of assets combined in the Philippines

or contributed into the joint venture exceeds the threshold, or
(b) the gross revenues generated in the Philippines by assets
combined in the Philippines of contributed into the proposed joint
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