CHAPTER VIII COMPETITION POLICY

OVERVIEW

What is a Competition Law?

Competition law refers to the framework of rules and regulations designed to foster the competitive
environment in a national economy. It consists of measures intended to promote a more competitive
environment as well as enactments designed to prevent a reduction in competition.

What is Competition Policy?

Competition policy broadly refers to all laws, government policies and regulations aimed at establishing
competition and maintaining the same. It includes measures intended to promote, advance and ensure
competitive market conditions by the removal of control, as well as to redress anti-competitive results of public
and private restrictive practices.

What are the goals of Competition Policy?

What are the basic market structures in which the degree of competition affects prices, outputs
and profits?

What is a market failure?

Market failure occurs when the market is unable to achieve an efficient and equitable allocation of resources.

What are the sources of market failure?

 Public Goods – which if provided to one consumer, is freely available to all consumers
 Income Distribution – the market will not necessarily ensure equitable distribution of incomes. This
may motivate government to introduce policies to redistribute wealth through measures, i.e., income
taxes and social security benefits.
 Monopoly – the operations of monopoly or natural monopoly often result in misuse of market power
and inefficient allocation of resources, which reduce community welfare. For this reason, governments
generally regulate monopoly and enforce laws preventing cartels. This type of market scenario is a
major rationale for a comprehensive competition policy.
 Externalities – arise when an activity confers a benefit (like the benefit of education or immunization)
or imposes a cost (pollution) on a third party, without the cost or benefit being included in the market
price of that activity.
 Information Asymmetries – in theory, buyers and sellers in a competitive market have complete
knowledge about a product or service characteristics and quality. Information asymmetries between
producers and consumers can lead to market failure and reduce community welfare.

What are the main areas/concerns which competition policy and law should address?

Philippines’ Major competition-related laws

 1987 Constitution - Prohibits monopolization and combination in restraint of trade (on a rule of
reason basis), but has no imposable sanctions for violation;
 Revised Penal Code of the Philippines (Article 186) - Describes monopolization and combinations
in restraint of trade as acts punishable and describes penalties, including imprisonment and fines of
between P200,000.00 and P600,000.00; it is similar in nature to Section 2 of the US Sherman Act;
 Republic Act 3247 – Known as the Act to Prohibit Monopolies and Combinations in Restraint of
Trade, this law provides for treble damages for civil liabilities arising from anti-competitive behaviour.
 Republic Acts 165 and 166 - These are the Patent Law and Trademark Law, respectively, and
describe the appropriate civil actions which can be resorted to and penalties imposable for breaches.
 Presidential Decree 49 - This is the Copyright Law and penalizes copyright infringement.
 Republic Act 386 - This is the Civil Code of the Philippines and stipulates the collection of damages
arising from unfair competition.
 Republic Act 7581 - The Price Act protects consumers by stipulating price manipulation (hoarding,
profiteering and cartels) as illegal for certain commodities in cases of emergency.
 Republic Act 7394 - The Consumer Act of the Philippines imposes penalties for behavior such as
deceptive, unfair and unconscionable sales practices in both goods and credit transactions.
 Philippine Corporation Code - Provides for rules and proceedings for approving mergers,
consolidations and combinations for the Securities and Exchange Commission
 Executive Order (EO) No. 45, series of 2011 - Designating the Department of Justice (DOJ) as the
Competition Authority

What is the Office for Competition?

The Office for Competition (OFC) is the country’s central body on competition created pursuant to EO No. 45
(Designating the Department of Justice as the Competition Authority) signed on June 9, 2011. OFC is under
the Office of the Secretary of Justice.
What are the duties and responsibilities of the OFC?
 Investigate all cases involving violations of competition laws and prosecute violators to prevent,
restrain and punish monopolization, cartels and combinations in restraint of trade;
 Enforce competition policies and laws to protect consumers from abusive, fraudulent, or harmful
corrupt business practices;
 Supervise competition in markets by ensuring that prohibitions and requirements of competition laws
are adhered to, and to this end, call on other government agencies and/or entities for submission of
reports and provision for assistance;
 Monitor and implement measures to promote transparency and accountability in markets;
 Prepare, publish and disseminate studies and reports on competition to inform and guide the industry
and consumers; and
 Promote international cooperation and strengthen Philippine trade relations with other countries,
economies, and institutions in trade agreements.