Lecture Outline

1. Overview of Competition act

2.Overview of the PCA

3.The Philippine Competition Commission

4.Prohibited acts under the PCA

5.Market Power, Determination of Dominate, Determination of Anticompetitive Conduct

6.Enforcement Tools of the PCC

I. Overview of Competition Act

Competition Law - is a regulatory in nature, seeks to protect competition by controlling the exercise of
market power which leads to higher prices, less choice and lower quality and less innovation in products
and services

Market - it is composed of buyers and seller of a particular good or service.

5 kinds of Market

1. Perfectly competitive

2.Monopoly

3.Oligopoly

4.Monopolistic Competition

5.Monopsony 5. 6.

6.

Perfectly Competitive - there are many sellers and buyers but they cannot influence over the price of
goods and services being traded. It is Price takers

Law of supply and demand - it explains how supply and demand is related to each other and how that
relationship affect the price

* S>D = prices fall

* D>S = prices rise

* quantity supplied rise when prices is rise to

* when the prices falls down the quantity supplied also falls

* quantity demanded falls the price rises

* when the prices falls, the quantity demanded rise

* supply and demand rise and fall until an equilibrium point is attained

Factors that influence the supply

1. Technology -

2.Input prices

3.Prices of related goods

4.Government policy

5.Special influences

Factors that influence demand

1. Average income

2.Population

3.Prices or related goods

4.Taste

5.Special influences

Why a perfectly competitive market is the gold standard?

A competitive market:

* is one with may buyers and sellers

* drives market prices lower

* offers consumers a wider range of choices

* encourages efficiency and innovation

* motivates businesses to excel

Imperfectly competitive market

 1. Monopoly - there is one firm in the market which produces a particular good or services. They are
price-makers

* produce less than the socially efficient quantity

* charge prices way above the cost of production

Natural Monopoly - it exist in a particular market that serve at lower cost than any combination of two
or more firms (water and electrical distribution)

2. Oligopoly - a situation where there is more than one but only very few firms in a industry. (OPEC)

*they cannot build competition but creates a cartel (a group of firms acting as one)

Duopoly - a type of oligopoly that two firms who have dominant control over a particular market

3. Monopolistic Competition - it resembles a perfectly competitive market. Wherein the difference

between them is that perfectly competitive market is that the products are identical with each other
while the monopolistic competition is differentiated of a products. Price-maker.

4.Monopsony - a flipside of monopoly wherein the seller and buyer have no rivals. They can easily
dictate the price of a marticulat products being sold by the firm.

Competition law in the European Union

* the treaty of the Functioning of the European Union (TFEU) signed in 1957

* the European Commission

Part II: The Philippine Constitution

Under Section 19, Article XII of the Philippine Constitution sets out a policy of regulating or prohibiting
monopolies during instances when the public interest requires it.

Statues Treating Anticompetitive conducts

1. Article 186, RPC

2.Article 28, NCC

3.Consumer act, Price Act, General Banking Law of 2000

Philippines Competition Act was on signed on July 21 2015 by President Aquino. It aims to enhance
economic efficiency and promote free and fair competition in trade, industry and all commercial
economic activities.

What is the welfare standards/ goals of the PCA?

* Economic welfare goals: consumer welfare, producer welfare, total welfare

* Non - economic welfare goals: nationalism/ protectionism, helping the marginalized sectors

Part III: The Philippine Competition Commission

* composed of a chairperson and 4 commissioners and must be a citizen and residents of the
Philippines. That has a good moral character, or recognized probity and independence and must have
distinguished themselves professionally in any of the following fields: economics, law, finance,
commerce or engineering.

PCC Composition

* one member of the Bar with at least 10 years of experience in the active practice of law and at least
one shall be an economist

* 3 members shall contitute a quorum and the affirmative vote of 3 members shall be necessary for the
adoption of any rule, ruling, order, resolution, decision.

Part IV: Scope and Jurisdiction of the PCA

Section 3, PCA: this act is enforced to the person or entity engaged in any trade, industry and commerce.
And applicable to the international trade having direct, substantial and reasonably foreseeable effects in
trade.

Extraterritorial application in the US

1st Prong: has a direct, substantial and reasonably foreseeable effect on American domestic, import and
export commerce

2nd Prong: have effect on "gives rise" to an antitrust claims

3rd Prong: Not adversely affect international comity

* Implementation Doctrine: allows the European Commission to assert jurisdiction over non-EU
companies that sell directly into the EU
* Qualified Effects Doctrine : permits the European Commission to extend to any conduct that has an
immediate, foreseeable, and substantial effect

In the Philippines

* the PCA and US share the same terminology

* the Civil procedure and private international law is inspired in US

* US approach takes into consideration international comity

* US approach is more well developed with parameters and guidelines

* the interpretation as to the Extraterritoriality application of the PCA could benefit from both EU and
US approach

Other Jurisdictional Limitations of the PCA

1. Non application to activities of Employees

2.Non application to trade associations

3.Non retroactive applications

4.Statute of limitations - within 5 years

5.Date of effectivity (April 8, 2015)

6.Applicability to Governmental actions: Rule on usability

Powers and Functions of the PCC

1. Conduct inquiry, investigate and hear and decide on cases involving any violation of the PCA

2.Review of proposed mergers and acquisition

3.Anticompetitive agreement or abused of its dominant position

4.Inspection orders or search warrants

5.Available beliefs such as adjustment or divestiture order

* PCC may conduct activities moto propio or upon receipt of a verified complaint.

*Full administrative Investigation can be in this two:

1. Administrative in nature - after notice on the basis of evidence, they may issue an order for
temporary cessation or desitance
 2.Criminal in nature - the PCC may file before the DOJ criminal complaints for violations of the PCA.
And the DOJ shall conduct preliminary investigation in accordance with Revised Rules of Criminal
Procedure.

PCC's Power to Hear and Decide Cases

* Decisions of the PCA are appealable to the CA.

* as a general rule, the appeal shall not stay the order, ruling or decision

Private actions - any person who suffer may institute a separate and independent civil action

Part IV: Prohibitions under the PCA

1. Anticompetitive agreements

2.Abuse of dominant position

3.Anticompetitive M&As

Anticompetitive agreements - any form of conduct arrangement or understanding or among business to

fix prices, manipulate bids, allocate markets or restrict outputs. It may be formal or informal, written or
tacit

Section 14, PCA

A. The following agreements between or among competitors are per se prohibited

* restricting competition as to price

* fixing price at an auction or in any form of bidding

B. T he following agreements, between or among competitors which have the object or effect of
substantially preventing, restricting or lessening competition Sha be prohibited

* settling, limiting or controlling production, markets, technical development or investment

* Dividing or sharing the market

C. Agreements other than those specified in a and b of this section which have the object

Effect of substantially preventing, restricting or leasing competition shall also be prohibited

Agreement prohibited by the PCA

1. Price fixing - competitors collide for the prices for their products or service

2.Bid- rigging - they participate to coordinate their bids, rather than submit independent bid prices

3.Output limitations - agreements to set a limit of output of control a production or setting a quota

4.Market sharing - producers restrict their sales of G/S to certain geographic areas

Anticompetitive Agreements

The first step

1. Horizontal agreement - they competing with the same product at the same level of distribution
(apple vs Samsung)

2.Vertical agreement - one party is classified as an upstream participant for a certain goods and relies
on the other to distribute the good (apple to globe and Samsung to smart)

The second step - determination If the agreement is subject to the rule of per se illegality or the rule of
reason

* Per se Illegal - agreements that are clearly and irrefutable illegal

* Rule of reason analysis - a system of analysis utilized to assess the legality of allegedly anticompetitive
conduct

Sec. 30. Criminal Penalties - the violation may be penalized by imprisonment from 2 to 7 years and fine
not less than Php 50,000,000 but not more than Php 250,000,000

Possible Justifications/ Exceptions (Horizontal Agreements)

* Justified horizontal agreements - contribute to improving the production or distribution of goods and
services to promoting technical or economic progress

*Joint Ventures - an association of person or companies jointly undertaking some commercial enterprise
with all of them generally contributing assets and sharing risks

TWO TYPES OF JOINT VENTURES :

1. Contractual JV

2.Incorporated JV