LAW6254 - Regulatory Framework and

Legal Issues in Business

Lesson 1 - Regulatory Framework: Definition, Overview, and Partnership Programs

Regulatory Framework
• Regulatory framework came from the words, regulate which means to govern or direct
according to rule and framework which means basic conceptual structure, as defined by
Merriam Webster dictionary. When joined, it comes with varying definitions as this term is
being used in different industries and disciplines.
• In the field of business, regulatory framework refers to the concept of rules, laws, decrees,
policies, regulatory bodies and other important regulatory information with regards to
running and forming a business, as mandated by the Constitution. These are the things that
current and future business owners need to take into consideration as it contains the outline
of measures that business enterprises should bear in mind.
• Regulatory Framework indeed involves a lot of concepts, most of which concern what are
indicated m the Philippine Constitution. It involves business laws, which also refer to the
laws to follow concerning commercial matters. It has two main types namely: Regulation
of Commercial Entities and Regulation of Commercial Transactions.
• Apart from the main types of business law, it also involves sub-type of laws pertaining to
the following concepts in business:
◦ Antitrust
◦ Intellectual Property
◦ Taxes
◦ Employment
◦ Consumer Goods Sales
◦ Contracts Drafting, Negotiations and Litigations
◦ and many more
• To give you an actual overview of the existing laws in business, here are some examples as
sourced from the Philippine Constitution.
◦ Labor Code of the Philippines (Presidential Decree No. 442)
 ◦ Intellectual Property Code of the Philippines (R.A. 8293)
◦ The Corporation Code of the Philippines (B.P. 68)
◦ National Health Insurance Act of 1995 (R.A. No. 7875)
◦ Securities Regulation Code of the Philippines (R.A. No. 8799)
◦ Consumer Act of the Philippines (R.A. No. 7394)
◦ Insurance Act of the Philippines
◦ and many more
• Along with the business laws that makes sound business transactions possible to occur in
the nation, we also got the different regulatory bodies that perform duties to ensure that
both rights and safety of business enterprises and consumers are being taken care of. Those
regulatory bodies include the following:
◦ For Both Import and Export-oriented Businesses:
▪ Bureau of Internal Revenue (BIR)
▪ Department of Trade and Industry (DTI)
▪ Security and Exchange Commission (SEC)
▪ Local Barangay
▪ City Hall
▪ SSS, PhilHealth and Pag-Ibig
◦ For Export-oriented Businesses only:
▪ Philippines Economic Zone Authority (PEZA)
▪ Bureau of Immigration
• It is essential that we register our businesses as part of the abovementioned regulatory
bodies or business agencies, for our business to be considered as legitimate and credible.
That way we will save ourselves and our business from future conflicts concerning laws.
• Further and detailed discussions about the concepts mentioned above will reflect on the
succeeding parts of these course modules.
Partnership Programs in the Philippine Business
• It is never a new idea for us that people tend to collaborate in order to accomplish or do
something. We were actually bound to give help and seek help from others as we are
humans. Therefore, it is not a new sight that we encounter the term, “partnership” in many
different aspects of life. In this case we are going to dig into the meaning and purpose of
partnership in the field of Business and the different partnership programs existing in the
Philippine business setting.
• According to the Civil Code of the Philippines Article 1767, partnership pertains to two or
more persons who bind themselves to contribute money, property or industry to a common
fund, with the intention of dividing the profits among themselves.

• Merchants or business owners who preferred to do business with a partner, rather than opt
to sole proprietorship, are bound to share and contribute an amount of resources to what is
called a common fund. Both, or all owners of the business are called partners or co-owners
(Toughnickel, 2020 as cited from Uniform Partnership Act, Sec.6).
• Common fund is a strategy in investing that makes use of contracts rather than relying on
insurance policy, trust or corporation. It allows equal benefits to be gained by the co-
owners/ partners in a business as an investment return (Tatum, 2020). Profits gained from
the business through partnership will be equally divided to its co-owners yet for some
instances it is not always the case. Partners are also expected to agree on terms regarding
matters about the business. As there is a common fund, there should also be a common
goal for partnerships to flourish. In some circumstances partnership starts with the goal of
exercising a similar or related profession.
◦ Examples:
▪ A construction firm owned by an engineer and an architect
▪ A day care owned by group of teachers
▪ An accounting firm owned by accountants and auditors
• Partnership in business doesn’t just start by saying “We got this”, or “We should be
partners” to one another in just an utterance without performing any formal conversation
about it. Partnership follows a set of rules or mandates from the law, in order to be
considered as formal “partnership.” As it was stated from R.A 386 Civil Code of the
Philippines Article 1769, in order to determine if a partnership exists in a business, the
following rules shall apply:
◦ Except as provided by article 1825, persons who are not partners as to each other are
not partners as to third persons;
▪ If there is no mutual agreement that the first person is a partner to the second and
vice versa, then no other person should treat them or recognize them as partners.
▪ Partnership should be consensual (Soriano, 2016).
◦ Co-ownership or co-possession does not of itself establish a partnership, whether such
co-owners or co-possessors do or do not share any profits made by the use of the
property;
◦ The sharing of gross returns does not of itself establish a partnership, whether or not the
persons sharing them have a joint or common right or interest in any property from
which the returns are derived;
◦ The receipt by a person of a share of the profits of a business is prima facie evidence
that he is a partner in the business,
▪ The acceptance of profit share by the other party gives the impression that two or
more persons have established a business partnership except when it would be given
as a form of payment as it was stated below.
• but no such inference shall be drawn if such profits were received in payment:
◦ As a debt by installments or otherwise;
◦ As wages of an employee or rent to a landlord:
◦ As an annuity to a widow or representative of a deceased partner;
◦ As interest on a loan, though the amount of payment varies with the profits
of the business;
◦ As the consideration for the sale of a goodwill of a business or other property
by installments or otherwise.
• According to Fidelito Soriano, contract of partnership should be:
◦ Consensual in nature, for it was agreed upon by everyone in the involved parties;
◦ Principal, that it stands as an independent entity;
 ◦ Bilateral and Multilateral, that both interests and concerns of all parties are properly
reciprocated;
◦ Nominated, that it carries a distinct name as per the law
◦ Well-prepared, that it is a business to be pursued and injected with other contracts as it
approaches growth and;
◦ Onerous, that the business owners invests resources to constitute the common fund
• There are four types of Partnerships according to the general provisions of R.A. 386 Civil
Code of the Philippines Article 1776-1777:
◦ As to Object:
▪ Universal Partnership
• As it was stated in US Legal, this partnership demonstrates two or more persons
agreeing to allocate their individual properties and resources for the gain of the
business partnership
▪ Particular Partnership
• This type of partnership is focused only in fulfilling a certain venture or
milestone, once it is achieved then the partnership will be dissolved.
◦ As Regards the Liability of the Partners:
▪ General Partnership
• This partnership is not eyeing a particular or single venture, this opt to pursue an
unlimited liability, which means any party involved in the partnership are open
for lawsuit cases, if ever the business undergoes conflict (Bloomenthal, 2020).

• Limited Partnership
◦ This partnership has two kinds of partner or co-owner, one general partner who
has an unlimited liability of a business and a limited partner, who is not always a
part of business management process, therefore this partner holds limited
liability to the business as well.
• Apart from knowing what partnership is, it is also right and just that we make ourselves
familiar with our rights as a partner in a business. As it was stated in Article 1810 of R.A.
386 Civil Code of the Philippines, the main property rights of a partner are the following:
◦ His rights in specific partnership property;
▪ Example:
• If Juan and Juana are business partners in establishing a Coffee Shop, it is both
their right to own a property subject to the partnership, just like a part of the land
where the shop is located, only if, both agreed upon such circumstance.
▪ His interest in the partnership;
• Article 1812: A partner’s interest in the partnership is his share of profits and
surplus.
◦ Example:
▪ Ms. Rose has the right to get her share of the monthly profits of their
growing salon business from her partner, Mr. Luck, as well as the
remaining unused tools in the salon.
▪ His right to participate in the management;
• A partner of a business should not be denied of his/her right to hold a position in
managing the business.
◦ Example:
▪ If a chef wants to be the menu planner for the restaurant he and his
friends established, it is his right to demand it from his partner, as it is his
way of helping in managing the business.
Partnership Programs
• It is true that business has its many complexities, some are actually discussed in the first
parts of this module, but we got to understand that it is how it works. In order for a
partnered business to flourish, it is governed by regulations and ultimately it is subjected to
the following partnership programs that we will discuss in this part of the module.
• Partner/ Partnership programs are a strategic step in business where merchants comes up
with ways of attracting or encouraging other individuals to take part with the business and
market its goods and services (Rouse, 2018). It is like creating or building networks inside
a business.
• Partnership Program is one of the many reasons why partnership is a good and powerful
thing. You can actually make quick initial differences in your business through these
programs. In so many ways it can increase your sales, it can make your customer reach
wider and it will lend you a helping hand in carrying out your business goals.
◦ Public and Private Partnership (PPP)
▪ One of the biggest and most known partnership programs was PPP or Public-
Private-Partnership, a partnership made between the Philippine £government and
the private business firms.
▪ Public-Private partnership is vastly focused on projects concerning the building of
infrastructures, from facilities down to services. It is an agreement made between
the government and private firms bound by a signed contract. The private sector
serves as investors to make the projects possible. It allows divided risk allocation on
both public and private entities, minimizes cost while achieving development on
proposed projects and it paves the way for funding other equally important priorities
of the public office.
▪ Below is a graph showing the arrangement on how Public-Private Partnership carry
out duties in establishing a project, as cited from Jeffrey Delmon’s, Understanding
Options for Public-Private Partnerships in Infrastructure, World Bank, year 2010.

◦ As it was shown in the graph above, you can see that the spectrum was divided into
three brackets such as:
▪ Public Owns and Operate Assets
▪ Public-Private Partnership
▪ Private Sector Owns and Operates Assets
 ◦ The first stage of the spectrum includes the management of utility, restructuring,
corporatization and decentralization which are solely put as a duty or work of the
public sector only. It also includes arrangements on Civil Works and Service
Contracts. Once these are settled and accomplished already, then the concept of
partnership begins. As you can see, in the middle part of the spectrum, there is
already a collaboration of efforts that will happen between the public and the private
bodies. This will include everything about management and operating contracts, as
well as leases and affermage. Also, concessions, build-operate- transfer (BOT),
design-build-operate (DBO) concerns are under the duty of collaborating effort
from both public and private sector. On the last stage, the duty will be left to the
private firm only. The private sector will be the one to deal with the concerns on
Joint Ventures (JV) and Partial Divestiture of Public Assets, as well as dwellings on
Privatization and Full Divestiture.
◦ Below the spectrum is a line pointing on both ends, this shows the amount of
engagement or involvement the private sector will play in the whole process of
carrying out the project. As it was said on the explanation above, the first stage
would only need the efforts from the public sector, that’s why the extent of
participation expected from the private is characterized as low. On the second stage,
collaboration and cooperation in dealing with concerns were already established,
that is why the level of participation from both public and private sectors has
already achieved its equilibrium. On the latter part of the spectrum, duties were left
out to the hands of the private sector so that its level of engagement reached its high
status.
• Partnership for Growth (PFG) Program
◦ Partnership for Growth Programs aims to put attention to the economic growth and
development constraints happening in the nation. It is an agreement and partnership
made between the Philippine government and the United States government. On-
going projects under this program were patterned along four thematic areas:
▪ Regulatory Quality
▪ Rule of Law and Anti-corruption Enforcement
▪ Fiscal Space
▪ Human Capital Development
 ◦ This program is driven to gain further investments both within the nation and
overseas. It is also patterned to make trade flourish. These are the reasons why the
Philippine Government is trying to heighten capabilities of manpower to aid high-
growth sectors, make progress on the climate of investing in the nation, and ensure
that internationally accepted standards are being strictly followed as import
regulation. The Philippine Government has also stepped up in easing restrictions for
market entry and decrease cost of business practice.
Guide Questions and Answers
• Regulatory Framework and Partnership Programs: Definition and Overview
◦ What comprises the Regulatory Framework for Business?
▪ Regulatory framework for business comprises the laws, policies, rules, regulations
and regulatory boards and processes bound to be followed by current and future
business owners as it was mandated by the Philippines Constitution.
◦ Why do we have to educate ourselves about this matter? Will it make a difference in
our everyday living?
▪ It is just right to educate ourselves of matters concerning the regulatory framework
in business, whether or not we are already business affiliated individuals or
consumers, so that we can avoid future conflicts and mishaps to happen while we
run a business or when we consume a product or service from a certain business
enterprise.
• Partnership Programs in the Philippines
◦ What are the advantages of putting up a business in a partnership-oriented set-up?
▪ It is advantageous in a sense that you get to have bigger capital, you got someone to
share ideas with, liabilities will not just be shouldered by you, and management will
never just base on a single point of view of an owner.
◦ In your own understanding, why were partnership programs deemed to be important?
▪ Partnership programs are important for these are programs that kept businesses
sustained and carried out especially when it concerns bigger sums of capitals and
projects, particularly national projects. It becomes an aid to suffice monetary and
non-monetary needs of a certain project.

Lesson 2 - Securitization, Purpose Exemptions, and Insurance

Securitization
 • Securitization is the process of transforming assets into securities. It is being done by
turning illiquid assets into liquid assets, which are bonded or repackaged then consolidated
to create a pool that will then be sold to investors in the market. These investors will then
get the interest from these securities.
• To further explain the definition and process of securitization, let us discover how concepts
of assets, both liquid, and illiquid assets, work.
Asset
• Asset is a resource owned by an individual, a company, a corporation, or a country deemed
to be used for future purposes, particularly to benefit its owner with regards to finances,
sales, and expenses.
◦ Liquid Asset
▪ Resources that can easily be converted into cash.
• Examples:
◦ Cash
◦ Bank Funds/ Money Market Funds
◦ Stocks
◦ Silver/Gold
◦ Illiquid Asset
▪ Resources that can't easily be converted into cash.
• Examples:
◦ Real Estate (e.g., Building, Houses, etc.)
◦ Collectibles
◦ Shares in Private Companies
How Securitization Works
• We all know that concepts, may they be in real life or in business, really follow a certain
process. This process is the pattern by which a certain idea works. Most of the time, the
process undergoes lasts a long period of time, just like how securitization works. In this
part of your course module, you will see how it actually works. For a clearer vision of its
process, let us take a look at the diagram below:
• As you can see on the diagram, there are actually four main parties involved in the process
of securitization. These include:
◦ Borrower
◦ Finance Company/ Bank
◦ Special Purpose Vehicle or SPV
◦ Investors
• According to Prachi M of The Investors Book, these parties serve different functions in the
process, such as:
◦ Origination Function
▪ This is where actual borrowing of money from finance institutions/bank (which also
serves as originators) through loans happens. Financial Institutions then approve
loans of a certain amount in exchange for collateral property or resources from the
borrower.
◦ Pooling Function
▪ The collateral property will then be sold to the SPV or Special Purpose Vehicle
using pledge receipts.
◦ Securitization
 ▪ Special Purpose Vehicle or SPV will then convert the collateral/illiquid asset
receivable into marketable securities. These securities will then be forwarded to the
Merchant Banks, who will sell these to potential investors in return for a service fee.
▪ The investors will purchase these with the goal in mind that buying those will
benefit their end in the future. As they have extended the loan, they are subjected to
receive a return of investment that borrowers don’t know much about.
Types of Securitization
• With all the things discussed in the previous parts of the module in mind, it is not
impossible that there will be a variation of receivables that will be transferred to the care of
the finance companies/ banks.
• In this part of the course module, you will discover the different types of securitizations
and how they differ from each other.
• Securitization differs based on the kind of receivables being received by the finance
companies. Here are the types of securitizations and their respective receivables.
◦ Residential Mortgage-Backed Securities (RMBS)
▪ From homes, lands, or any property in real estate.
◦ Asset-Backed Securities (ABS)
▪ From consumer debts such as car loans, credit card debts, student loans, etc.
◦ Commercial Mortgage-Backed Securities (CMBS)
▪ From commercial buildings, factories, and plants.
◦ Collateralized Debt Obligations
▪ From repackaged personal debts.
◦ Future Flow Securitization
▪ From future debt receivables.
Advantages and Disadvantages of Securitization
• In every aspect of life where we actually engage ourselves and our businesses, it is
expected that some advantages and disadvantages will come along the way. The same goes
with securitization as a complex process; it can pave the way for opportunities or setbacks.
• Let us take a look at some of the advantages and disadvantages of securitization to both
originators and investors.
◦ Advantages
▪ Increased liquidity of assets
▪ Balance sheet would be wiped off of assets
▪ Faster money lent return
 ▪ Helps avoid loss for uncertain recovery of debts
▪ Helps in Risk Management
▪ Higher credit rates on the originators end
▪ Lower borrowing costs for issuers
◦ Disadvantages
▪ Transparency is at stake
▪ Superior gains from investors when the borrower did pre-payment would not
happen
▪ It's a complex thing to deal with
▪ Inaccuracy to risk assessment is more likely to happen
▪ Expensive cost in terms of establishing long-term capital
▪ Potential moral hazard is very high
▪ May decrease business value

Purpose Exemptions
• It is not out of our conscious minds that government projects were funded by the tax being
paid by the people. But not everyone is subjected to pay tax, for we have this so-called
purpose exemption.
• Purpose exemption, also termed tax exemption, pertains to transactions, income, or types
of businesses that are exempted or free of tax or compulsory payment of tax, both at the
state or local level.
• Transactions, income, or types of business exempted from paying state or local tax should
and only be mandated by the law or constitution as a majority decision of Congress. If the
law orders to revoke the tax exemption based on violation of certain provisions, then you
are obliged to pay tax already.
• In a sense, tax is the fee given involuntarily by individuals, businesses, institutions,
corporations, and such who and which are not included in the list of tax-exempted entities
in state or local government. This is technically being used to fund public and
governmental projects.
• Exemption to the payment of tax is deemed to be close to the concept of privilege,
especially when it is given abiding by the rules of contract, which most of the time applies
to corporations.
• Note that purpose exemption or tax exemption should not be interchanged with the concept
of the tax deduction, for they are two different things.
• Exempted from Paying Taxes
◦ Tax exemption is not simply applicable to all. According to Section 30 of the Tax Code
of the Philippines, there are only some who will be granted this exemption. Here are
some individuals or institutions which are exempted from compulsory state or local
fees, also known as tax, as cited from Tax Accounting Center website:
▪ An individual whose taxable income does not exceed P250,000.
▪ Churches and buildings used for carrying our religious duties.
▪ Educational institutions, as long as its non-stock, non-profit.
▪ Labor, an agricultural and horticultural institution not established after the goal of
gaining profit.
▪ Some mutual savings banks and cooperative banks without capital stocks and are
used for mutual purposes.
▪ Company cemetery used as benefits for its members.
▪ Non-profit business league, chamber of commerce, and board of trade.
▪ Non-stock beneficiary societies such as a fraternal organization that operates for the
benefit of its members.
▪ Social welfare promoting civic leagues or organizations.
▪ Farmers, irrigation companies, typhoon and fire insurance companies or other
organizations of local characters whose fees or profits just constitute meeting its
expenses.
▪ Organizations that were established to help increase sales through the marketing of
farmer’s products.
 • Although it was mentioned above that some non-stock non-profit businesses or
organizations are exempted from paying tax, the following businesses are not included
from being tax-exempted establishments despite the possibility of being non-stock,
non-profit as per certain Revenue Memorandum Circulars:
◦ Operating clubs that are organized for recreation, pleasure, and entertainment
purposes as stated from Revenue Memorandum Circular no. 35-2012.
◦ Under Condominium Act, condominium companies are not exempted from paying
taxes as per Revenue Memorandum Circular no. 65-2012.
Insurance
• Putting up a business equates to risk-taking. It is a complex field that needs a lot of
thinking in order to be established. It also involves a lot of financial investments that
business owners cannot afford to put to waste. Because of this circumstance, insurance
becomes an avenue to help in managing the risks of running a business.
• Insurance is your protection against financial losses in case unexpected negative events
happen to you or to the business you’ve put up in the future. If you fail to buy or avail
yourself of insurance, you will be the one who will shoulder all related costs when
something unfortunate happens.
• Insurance is a written contract or agreement between the policy owner and the insurance
company. Both person and companies can be subjected to insurance.
• Take note that before availing of any insurance policy, make sure that you do your research
about your prospective insurance provider so as not to be a victim of scamming in this
aspect.
• There is a lot of insurance in this life, but we are just going to focus on business-related
insurances that we need to protect our businesses with. Located on the next page are brief
discussions of different business-related insurances that we all need to know.
• Below are the different types of insurance that also apply to different types of businesses.
Let us take a look at what these insurances are as cited from Entrepreneur: Asia Pacific.
◦ Property Insurance
▪ If unfortunate events like flooding, theft, fire, and such happen, everything you own
inside your company building or area is insured, from equipment to furniture.
◦ Worker's Compensation Insurance
▪ In case accidents happen to your employees within working hours and vicinity, this
insurance will cover the worker's hospitalization or medical fees, disability, and
even death benefits.
 ◦ Product Liability Insurance
▪ When your business involve the marketing of products to the general public, this
will help you face lawsuits in order to cover all the damage your product may have
caused a customer.
◦ Business Interruption Insurance
▪ This type of insurance will help you recover from the loss of income because of the
inability of your manpower to work in the field due to catastrophic circumstances.
◦ Professional Liability Insurance
▪ In case there will be negligence, error, or mistakes committed by anyone who is part
of the business, this type of insurance will help the business recover from the
damage it has cost. This policy is customized to the characteristics and kind of
business you may have.
◦ Vehicle Insurance
▪ Company vehicles or vehicles used to fulfill duties regarding your business should
also be insured in case unfortunate accidents happen to cover repairs and third-party
damages the accident will cause.
◦ Home-Based Insurance
▪ This insurance protects those working from home, business owners or home-bound
businesses to cover unexpected liabilities involving their business or their
equipment and inventory in case something happens.

• Advantages and Disadvantages of Availing Insurance

◦ As stated in the previous parts of this module, things that bring advantages to our lives
may also come with their own disadvantages. Let us take a look at some of the
advantages and disadvantages of buying insurance policies to protect our businesses.
▪ Advantages
• Risks are being shared
• Business operations are being done smoothly, for there are less worries
• Protects business from any company loss from unexpected events
• Aids with granting of loans to be used for funding
• Constitute to the development of the economy through investment
▪ Disadvantages
• Adds to the business expenses
• Legal formalities will take too much time
 • For some instances, it doesn't always cover the total amount of loss in a business
• For some instances, claims are being denied
• There are also instances that the amount being paid for a premium account is
greater than what is being received when the policy matures
◦ Insurance policies are really advantageous for businesses; it helps with covering any
liabilities that may come in the way of business operations; it saves business owners
from worries that these may have caused. It can even help in boosting the economy.
Indeed, insurance plays a big role in the Philippine business setting.

Lesson 3 - Regulatory Landscape of Business Organization and Regulating Competition or

Anti-Trust Law
Overview of Regulatory Landscapes
• Business is business. It is well-thought-of, planned, and organized by everyone who is
involved with it. We have already reached the era of advanced technologies and think that
it is already a factor being considered in creating or formulating landscapes that businesses
opt to follow or use as guidance as their enterprises grow from one level to another.
Current events, situations, and types of people are just some of the many considerations
business runners should look into whenever they put up a new business enterprise.
• Regulatory Landscapes can be looked into as mapped out plans if a problem or risk arises.
The year 2020 opened up the possibility of higher risk that will greatly affect businesses if
not handled and blocked properly due to the global pandemic and the changing economic
status of every nation in the world because of numerous changes and unexpected
happenings. The emergence of change is inevitable. It truly is something we cannot avoid
or ignore.
Regulatory Landscapes of Business Organization Around the World
• There are a lot of business organizations in the Philippines, even more, in the different
parts of the globe. Each business is different from the other. It is understandable that these
businesses follow different Regulatory Landscapes to cope with the risks that changes in
different aspects of the business may bring.
• As it was stated that regulatory landscapes could be different from each other in every part
if the world, some businesses may be subjected to strict rules compared to others. Despite
these facts being said, according to Jim Low of Risk and Regulatory Centre of Excellence
in America Region, what is important to keep in mind by enterprises and companies, is to
develop a “Strategic Initiative” to counter the impact of the drastic change happening
during these times. Also, it was said by Simon Topping of Risk and Regulatory Centre of
Excellence in ASPAC Region that it is also relevant that companies understand “the new
world order.”
• Below is a diagram that shows the different aspects of a regulatory landscape that
businesses, enterprises, and companies should take note of.

• As shown in the diagram above, three aspects of regulation constitute a Regulatory

Landscape, according to the research made by the University of Cumbria. These include:
◦ Traditional Regulation
 ▪ Traditional regulation, coming from the word "traditional," meaning it is
conventional, as it existed too many years back in time. This involves regulations
coming from the public sector, the government per se, to make up national
regulations and the treaties, agreed-upon nations, which constitute the international
regulations.
◦ Co-Regulation
▪ Co-regulation, from the word itself, co-, meaning a joint effort or partner regulators
act upon a role in keeping businesses afloat during times of crisis or drastic changes.
This includes the regulations coming from intergovernmental organizations like
United Nations and World Bank, corporations, non-governmental organization like
Greenpeace or the World Wildlife Fund, and other parties like insurance companies,
e.g., Insular Life Insurance, Manulife Insurance, BPI-Philam Life Insurance Corp.
Inc. (BPI-Philam).
◦ Self-Regulation
▪ As the term suggests, self-regulated regulations will come from the business
enterprise itself, which are barely associated or related with public influence and
actors.
Navigating the Changing Landscape in the Business Environment
• It was mentioned a while ago by Jim Low, an expert in business regulations of Risk and
Regulatory Centre of Excellence in America Region, that companies or businesses should
develop a “Strategic Initiative” to survive the dynamic business world.
• Below is a diagram showing a strategic context on what is actually the sole purpose of
Business Organizations and the things that should be considered in keeping it afloat despite
the risks of the changing business scene.
• In order to navigate the changing business landscapes being used all over the world, we
should always keep on thinking that “Prevention is always better than cure.” It is much
better to think ahead than to think behind. Businesses need to have strategic initiatives to
endure the impact of the changing world to cater to the needs of its consumers.
• We should know that Business Organizations exist for there are consumers. Consumers
buy the reason why things are being done and not what was done, function vs. material,
according to Simon Sinek, as cited from Buhlebenkosi Consulting. Consumers are very
particular about the function of the product. Will they be really using it to make their lives
convenient, or will they be able to use it for a very long time or not? Those are the things
that consumers ponder upon purchasing something so as business owners, we should
always be prepared to meet the demands of our consumers, given the dynamic
circumstances happening today.
• As it was shown in the diagram from the previous page, there are five things to consider in
navigating changing business landscapes in the different business environments, as cited
from an article written by Blessing Mdladla in the Buhlebenkosi Consulting website. These
include the following:
◦ Disruptive Innovation
 ▪ Innovation is just right in the corner. Things innovate so fast, so do business
strategies and ideas. In order to keep the business, you should be able to expect that
your business might get affected by a disruptive innovation of a particular business
competitor. From that expectation, you have to draw plans. What are you going to
do as a company or enterprise not to lose loyal customers to a business competitor?
◦ Changing Customer
▪ As time ages, it also produces a new breed of customers or consumers. Because of
the rapid change in technology, it is easier for consumers to weigh which product or
service is worth spending for. The tastes or preferences of customers nowadays are
getting more meticulous than it was ever before. What should a business do to jive
with the demands of the digital age?
◦ Regulation and Regulators
▪ Another thing to consider was the existing regulations and the regulators
themselves. Are they enough to keep the business going? Neither were those
regulations not lacking or overregulated? Were the regulators honest in doing their
duty? These things greatly impact the business status when a crisis comes. This can
either do the business or break the business.
◦ Technological Advancement
▪ Technological advancements are one of the reasons why business booms, but it can
also be the reason why a business may face its downfall. That will happen when the
business cannot keep up with the shifting demands of products and services
involving advancements in the aspect of technology. They will be left behind as
consumers grow fondness on demands that are a new and convenient cause of
technology.
◦ Changing Market and Economic Environment
▪ Due to unexpected happenings in the world today, the market and economic
environment are affected. A stall which was open till 11 pm in the evening no longer
lasts that long and numerous sales are on-going. Though these may seem something
we should be happy about as shoppers, these actually affect the sales and profit of
the shops renting inside and that will say a lot about the condition of the market and
economic environment of the nation. It really is challenging to be an entrepreneur
today, but we have to come up with strategies on how to bounce back despite all.

Domination of the 2020 Regulatory Landscape of Business Organizations

• It is not out of our conscious mind that 2020 has been a challenge to everyone, more so to
the business industry. As 2020 remains challenging, it is also not shocking news that it will
leave a lot of to the business owners and that the struggle will continue. Let us find out
some aspects that businesses have focused on during these trying times.

• This year’s regulatory landscape of business organizations was dominated by the following
themes as it was stated in an article cited from ey.com authored by Marc Saidenberg et al.
◦ Operational Resilience
▪ Operational resilience has been a focus this 2020 for issues in information
technology have emerged, just like cyber security and IT failures. This may have
been driven by the mobilization of systems and data due to the on-going pandemic
that forced people to work from home.
◦ Environmental, Social and Governance Criteria, and Societal Issues
▪ The emergence of crisis also paved the way for societal issues to come out on the
surface and be talked about. Even the ESG criteria which were used to measure if
an investment is sustainable and ethical, also undergone a whole new challenge.
Unexpected events set new expectations for business enterprises in maintaining a
sustainable and ethical environment.
◦ Evolving and Emerging of Data and Technologies
▪ This year, AI or Artificial Intelligence and MI or Machine Intelligence have been
the subject of the spotlight for most businesses shifting to AI and MI controlled
systems. Because of this, business experts are trying to anticipate and prepare for
the risks that the use of AI and MI in carrying out business processes may bring.
◦ Post Crisis Issue
 ▪ When the crisis finally comes to an end, it doesn’t mean it is also the end of
struggles for the business industry. The business industry still needs to work on and
enhance policies and regulations in order to avoid business-related crimes.
Regulating Competition or Anti-Trust Law
• Competition is unavoidable in the business industry. Regardless of how unique and
original your business idea may be, competitors will still emerge and try to compete with
you in the business. This aspect of the business is also being regulated abided by the
contents of the law.

• Business Competition
◦ Business competition is the rivalry between two or more companies or business
enterprises of the same field and industry who offer the same products and services.
Some, who are not really that immersed in business might take competition as
something that is fully negative, yet it is not. One of the common misconceptions with
business competition is that it just causes one business sales to drop down, or it just
divides the attention of the consumers, but no. Business competition actually
contributes a fair share of beneficial effects to the business industry, and we are going
to discuss that in the latter part this module.
• Types of Business Competition
◦ Competition doesn’t just come in a single form. It comes in 4 major types, namely:
▪ Perfect Competition
• A competition is perfect when:
◦ Products are alike, homogenous or a commodity
◦ If all firms don't have any control over the market prices of their products
 ◦ Consumers know everything about the product being marketed
◦ There is no cost for entrance and exit in the market
◦ Prices are not influenced by market shares
◦ Labor resources should be mobile
▪ Example:
• Foreign Exchange Industry
▪ Monopolistic Competition
• A competition is considered a monopolistic competition when:
◦ There are many sellers
◦ Products have variations though they serve a similar purpose
◦ Has little power in raising product prices
◦ There is a strong advertising strategy being laid out
▪ Example:
• Restaurants
▪ Oligopoly
• A competition is considered oligopoly when:
◦ There are few sellers
◦ Firms supply large amounts or portions of products
◦ Formation and dissolution are greatly influenced by economic, legal, and
ethical factors
◦ Somewhat restricts fixed prices for greater returns
▪ Example:
• Airline Industry
▪ Monopoly
• A business is considered a monopoly if:
◦ There is only one seller.
◦ Barriers of entry are very high.
◦ Seller decides the price of the service or product
▪ Example:
• Microsoft
• Advantages and Disadvantages of Competition in Business
 ◦ It was mentioned in the former parts of this module that competition in business is not
all thorns and struggles: instead, it also paves the way for many beneficial effects. Let
us take a look at the advantages and disadvantages of competition in both business and
consumer.
▪ Advantages of Competition
• Awakens the drive of the business to step up and improve products and services.
• Prices of products drop.
• Consumption rate will increase.
• Better products are being developed because of product differentiation.
• Boosts awareness that a certain product exists and is available to be consumed.
• Increases company profits due to low cost in manufacturing the product.
• Consumers get to have more options.
• Consumer needs will most likely be met.
▪ Disadvantages of Competition
• Reduces market share.
• Purchasing decision will be complicated for consumers.
• It may shrink small businesses.
• It may discourage or intimidate other would-be businesses to operate.
• May lead to customer exploitation.

Lesson 4 - Regulating Competition or the Anti-Trust Law and Financial and Securities
Regulation
Anti-Trust Law
• Business operations are very critical. It takes a lot of things to consider before putting up a
business, and once you are able to put it up and establish its name, competitors emerge,
and it is perfectly fine. What is not fine and should be watched out for in the business
industry are the practices that harm healthy competition, those unfair business practices
that endanger the welfare of both consumers and fair businesses. In these situations, the
essence of Anti-trust law is very much useful.
• Anti-Trust Law is a set of laws or policies formulated and implemented by governments
that aim to maintain honest and fair business competition within a nation. It serves as an
interference to possible unlawful monopolies that will greatly harm the consumers. Its
mission involves keeping low and reasonable prices of products arid services without
compromising its quality.
• In essence, “trusts” in the term, Anti-trust refers to the business entities or companies who
merge with each other to create a monopoly and influence the pricing of goods in the
market. Simply, Anti-trust means against predators and abusive monopolistic and unlawful
companies.
• Questionable Practices in Business
◦ According to an article by James Chen, cited from Investopedia, some of the target
unlawful activities of companies that Anti-trust law aims to stop include, but are not
restricted to, concerns on market allocation, bid-rigging, price-fixing, and monopolies.
Let us discover further details about these and how they differ from each other.
▪ Market Allocation
• In Market Allocation, as the term suggests, there will be an allocation or
restriction that will happen among members of the competition. What will be the
things that will be allocated or restricted? It can be the type of consumers, the
products or the geographical location or territories where businesses market their
products or services. This removes competition that paves the way for higher
profit and pricing of goods.
◦ Example:
 ▪ Royals Company and Crown Company agreed on terms that they will
divide the type of customers they will accommodate in their shops.
Royals Company will be catering to the student customers, while Crown
Company will cater to the office workers. They will deny accommodation
to customers that do not belong to the type of customer assigned to them.
Because of this, competition between the two companies will no longer
exist.
▪ Bid Rigging
• In Bid rigging, the members of the competition will conspire to let a single
member win in the bidding process. In return, the winning bidder will let the
conspiring bidders win the next project. Through this, they prevent the existence
of competition without compromising their market shares and price.
◦ Example:
▪ Alliance Corp., Builders Corp., and Titanium Corp. are all infrastructure
companies that aim to secure projects in building public highways. They
agreed to let Alliance Corp. win the bid by bidding low, giving off the
project to Alliance. On the next project, it will be Builders turn to win;
then, on the third, it will be Titanium’s. This way, all three companies get
to secure projects, driving away the competition.
▪ Price Fixing
• Price fixing scheme involves intentional price suggested by the companies
themselves who actually have the same products to secure profitability among
companies who are members of the competition.
◦ Example:
▪ Bright Company agreed with Pleasant Company to sell their goods at the
same price level, which can be higher than the reasonable price so that
customers will not have any choice but to just buy products from either of
the two companies. This way, both companies get to earn a large amount
of profit from the higher prices they have sold their products for.
▪ Monopolies
 • As was stated in the previous module, a monopoly has something to do with a
single company dominating the whole market share. It may be driven by the
high cost of getting into the kind of business venture, causing one company to
maintain supremacy in that industry. It just becomes unlawful when the
following happens:
◦ If the monopolistic company refuses to accept deals with potential operating
companies in order to avoid competition.
◦ If sales of two or more products are tied together, consumers will have no
choice but to buy everything.
◦ If there is predation in pricing of the goods.
◦ If the company’s supplier is restricted to sell to other companies.
▪ Example:
• One of the examples that can fall under this circumstance is the case
of Microsoft during the 90's.

Anti-Trust Law in the Philippines

• The Philippines is housing millions of consumers and numerous business owners;
therefore, it is right and just that they protect these consumers and monitor the activities of
these businesses so there would be a harmonious business environment in the country. The
Anti-Trust Law or the Competition Law of the Philippines aims to play that role.
• Below are the following provisions discussing laws and policies regarding business
competition in the Philippines, cited from Republic Act No. 10667, also known as the
Philippine Competition Act.
◦ Purpose of the Philippine Competition Act
 ▪ Enhance economic efficiency and promote free and fair competition in trade,
industry and all commercial economic activities, as well as establish a National
Competition Policy to be implemented by the Government of the Republic of the
Philippines and all of its political agencies as a whole (R.A. 10667, Chapter I,
Section 2).
• The act seeks to improve the economic stand of the nation, ensure justice in all
activities involved in the economy, and establish policies that the government
and its agencies will implement.
▪ Prevent economic concentration which will control the production, distribution,
trade, or industry that will unduly stifle competition, lessen, manipulate or constrict
the discipline of free markets (R.A. 10667, Chapter I, Section 2).
• The act aims to stop economic concentrations that will result in the non-
existence of competition and compromise the disciplines of free markets.
▪ Penalize all forms of anti-competitive agreements, abuse of dominant position and
anti-competitive mergers and acquisitions, with the objective of protecting
consumer welfare and advancing domestic and international trade and economic
development (R.A. 10667, Chapter I, Section 2).
• The act is made to give due sanctions and punishments to culprits of anti-
competitive agreement, abusive dominant positions, and anti-competitive
mergers and acquisitions so as to protect the welfare of consumers and the
nation's economy.
◦ Subjects of the provisions of the Philippine Competition Act
▪ This Act shall be enforceable against any person or entity engaged in any trade,
industry and commerce in the Republic of the Philippines. It shall likewise be
applicable to international trade having direct, substantial, and reasonably
foreseeable effects in trade, industry, or commerce in the Republic of the
Philippines, including those that result from acts done outside of the Republic of the
Philippines (R.A. 10667, Chapter I, Section 3).
• Any person or a business entity involved in the trade, industry, and commerce
inside the Philippines are included and those international entities that directly
affect the Philippine trade, industry, or commerce.
◦ Implementation of the laws and policies included in the Philippine Competition Act
▪ To implement the national competition policy and attain the objectives and purposes
of this Act, an independent quasi-judicial body is hereby created, which shall be
known as the Philippine Competition Commission (PCC), hereinafter referred to as
the Commission.
▪ The Commission shall be an attached agency to the Office of the President (R.A.
10667, Chapter II, Section 5).
• Philippine Competition Commission, or PCC, is the official law-mandated
regulatory body that will implement everything indicated in the act. It is also
considered an agency connected to the President's Office.
▪ Actions and Practices considered prohibited under the Philippine Competition Act
regarding Anti-Competitive Agreements
• The following agreements between or among competitors, are per se prohibited:
◦ Restricting competition as to price, or components thereof, or other terms of
trade (R.A. 10667, Chapter III, Section 14).
▪ It is prohibited to stitch an agreement between and among competing
businesses in assigning product or service pricing and other terms
involved in the trade.
◦ 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 (R.A. 10667, Chapter III, Section 14).
▪ Any form of practice related to bid-rigging is hereby considered
prohibited.
• The following agreements, between or among competitors which have the object
or effect of substantially preventing, restricting, or lessening competition shall
be prohibited:
◦ Setting, limiting, or controlling production, markets, technical development,
or investment (R.A. 10667, Chapter III, Section 14).
▪ Any practice that negatively affects the competition, such as set, limited,
and controlled production, market, technical development, or investment
is deemed prohibited.
◦ Dividing or sharing the market, whether by volume or sales or purchases,
territory, type of goods or services, buyers or sellers or any other means
(R.A. 10667, Chapter III, Section 14).
▪ Any form of market allocation is deemed to be a violation of the act.
▪ Rule about the Abuse of Dominant Position
• According to R.A. 10667, Chapter III, Section 15, any activity or practice of one
or more entities that will prevent, lessen, or restrict healthy competition is
deemed unlawful. Here are some practices included in the act:
◦ Selling goods or services below cost with the object of driving competition
out 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.
◦ 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.
◦ 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.
▪ Provisions about Mergers and Acquisitions
• The following provisions on mergers and acquisitions are indicated on Chapter
IV of the Act:
◦ The Commission shall have the power to review mergers and acquisitions
based on factors deemed relevant by the Commission (R.A. 10667, Chapter
IV, Section 16).
▪ The Philippine Competition Commission serves to review the application
of mergers and acquisitions by different entities so as to ensure that these
do not violate the law of competition in the Philippines.
 ◦ Parties to the merger or acquisition agreement referred to in the preceding
section wherein the value of the transaction exceeds one billion pesos
(P1,000,000,000.00) are prohibited from consummating their agreement until
thirty (30) days after providing notification to the Commission in the form
and containing the information specified in the regulations issued by the
Commission: Provided, That the Commission shall promulgate other criteria,
such as increased market share in the relevant market in excess of minimum
thresholds, that may be applied specifically to a sector, or across some or all
sectors, in determining whether parties to a merger or acquisition shall notify
the Commission under this Chapter (R.A. 10667, Chapter IV, Section 17).
▪ If the value of the merger or acquisition transaction exceeds one billion
pesos (P1,000,000,000.00), they still need to wait for thirty days after the
Commission was notified of the transaction.
▪ Failure to follow this provision would automatically consider the merger
or acquisition void and should be accountable to pay an administrative
fine amounting to one percent (1%) to five percent (5%) of the value of
the transaction.
▪ The Commission may ask for further information about the merger only
when it deemed necessary.
▪ When the Commission was not able to come up with the decision
regarding the notified transaction even after the expiration of the stated
time period, then the merger or acquisition is automatically approved and
implemented or consummated by the participating parties.
• Fines and Penalties for Proven Violators as stated in the Act
◦ As per Section 29 and Section 30 of Chapter IV of R.A. 10667, the
Commission is in duty to penalize Administrative and Criminal Penalties to
violators of the provisions stated in the act.
▪ In any investigation under Chapter III, Sections 14 and 15, and Chapter
IV, Sections 17 and 20, after due notice and hearing, the Commission may
impose the following schedule of administrative fines on any entity found
to have violated the said sections (Chapter IV, Section 29):
• First offense: Fine of up to one hundred million pesos
(P100,000,000.00);
 • Second offense: Fine of not less than one hundred million pesos
(P100,000,000.00) but not more than two hundred fifty million pesos
(P250,000,000.00)
▪ An entity that enters into any anti-competitive agreement as covered by
Chapter III, Section 14(a) and 14(b) under this Act shall, for each and
every violation, be penalized by imprisonment from two (2) to seven (7)
years, and a fine of not less than fifty million pesos (P50,000,000.00) but
not more than two hundred fifty million pesos (P250,000,000.00). The
penalty of imprisonment shall be imposed upon the responsible officers,
and directors of the entity(Chapter IV, Section 30).
• In addition to the abovementioned fines and penalties, there are also
respective fines for those entities that will commit the following
violations upon processing of fine or penalty to settle in accordance to
the initial violation:
◦ Failure to comply with an order of the Commission.
◦ Supply of incorrect or misleading information.
◦ Any other violations not specifically penalized under the relevant
provisions of this Act.

Financial and Securities Regulation

• In business, regulations are very important in order to keep the business operation on the
right track. With this to say, two of the most important regulations concerning the business
industry include both Financial Regulations and Securities.
• Financial Regulations are the existing rules, policies, and laws that financial industries or
entities follow. These entities include insurance companies, asset managers, financial
brokers, and of course, banks, as cited from Central Bank of Ireland’s website.
• On the other hand, Securities Regulations have something to do with the protection of
securities, which are defined as proven shares, participation, or interests of any business
entity in the form of a certificate, contract, or instruments, which were recorded through
writing or electronic characters.

• Different Financial Regulations in the Philippines

◦ As it was mentioned above, financial regulations are a set of laws, policies, and rules
that entities in the financial industry follow. In the Philippines, the sole responsibility
for implementing and monitoring adherence to the regulations is with the Bangko
Sentral ng Pilipinas or BSP. They direct policies involving national concerns on aspects
of money, banking and credit. BSP acts as the supervisor of all operations of banks and
non-bank financial institutions that play quasi-banking functions with the regulatory
powers vested by the law.
◦ As cited from lexmundi.com, the following are the most pertinent banking laws in the
Philippines, ensuring that banks are lawful in terms of operations and transactions:
▪ RA. No. 7653 The New Central Bank Act or the “BSP Law” as amended into R.A.
No. 11211
• The Bangko Sentral shall provide policy directions in the areas of money,
banking, and credit. It shall have supervision over the operations of banks and
exercise such regulatory and examination powers as provided in this act and
other pertinent laws over the quasi-banking operations of non-bank financial
institutions. As may be determined by the Monetary Board, it shall likewise
exercise regulatory and examination powers over money service businesses,
credit-granting businesses, and payment system operators. The Monetary Board
is hereby empowered to authorize entities or persons to engage in money service
businesses (RA. 11211, Sec. 3).
▪ R.A. No. 8791 The General Banking Law of 2000 (“GBL”)
• The General Banking Law contains supervising regulations for BSP applicable
to all banks located in the Philippines. Banks are also classified under this law:
thrift banks, cooperative banks, commercial banks, universal banks, Islamic
banks, and other classes, as the Monetary Board suggests. It also contains rules
and policies involving cessation of banking business, trust operations, loans,
deposits, placement under conservatorship, and investments.
▪ R.A. No. 7906 Financing Company Act
• An act providing for the regulation of the organization and operations of thrift
banks and for other purposes.
▪ R.A. No. 1405 Secrecy of Bank Deposits Act
• This law declares that any activity resulting in disclosing and inquiring about
any bank transactions is deemed prohibited, for it shall remain confidential.
▪ P.D. No. 129 Investment Houses Law
 • A decree governing the establishment, operation and regulation of investment
houses.
▪ R.A. No. 7221 Foreign Bank Liberalization Act
• An Act liberalizing the entry and scope of operation of foreign banks in the
Philippines and for other purposes.
▪ Foreign Currency Deposit Act (R.A. No. 6426, as amended, and P.D. No. 1035) (the
“FCDU Law”)
• An Act instituting a foreign currency deposit system in the Philippines, and for
other purposes.
▪ Anti-Money Laundering Act (R.A. No. 9160, as amended) (“AMLA”)
• An Act defining the crime of money laundering, providing penalties therefore
and for other purposes.
• Different Securities Regulation in the Philippines
◦ It is a fact that the Philippines is a huge business environment of different entities,
enterprises or businesses. Therefore, it is rightful that businesses are regulated properly,
especially in the aspects involving securities. The main policies that focus on securities
are indicated in Republic Act No. 8799, also known as the Securities Regulation Code.
Let us take a look at what is it in store in Republic Act No. 8799 regarding rules on
protecting securities.
▪ Purpose of R.A. 8799, otherwise known as Securities Regulation Code
• A socially conscious, free market that regulates itself, encourage the widest
participation of ownership in enterprises, enhance the democratization of wealth,
promote the development of the capital market, protect investors, ensure full and
fair disclosure about securities, minimize if not totally eliminate insider trading
and other fraudulent or manipulative devices and practices which create
distortions in the free market (R.A. 8799, Chapter I, Sec. 2).
◦ It is bound to protect the free market from any destructions coming from the
different unlawful practices mentioned above.
• Sole Administrator of the Code
◦ This Code shall be administered by the Security and Exchange Commission
(hereinafter referred to as the "Commission") as a Collegial body, composed
of a chairperson and four (4) commissioners, appointed by the President for a
term of seven (7) years each (R.A. 8799, Chapter II, Sec. 4).
 ◦ This Code shall be administered by the Securities and Exchange Commission
or SEC, declared and registered in SEC.
• Need for securities to be registered under SEC
◦ Securities shall not be sold or offered for sale or distribution within the
Philippines, without a registration statement duly filed with and approved by
the Commission. Prior to such sale, information on the securities, in such
form and with such substance as the Commission may prescribe, shall be
made available to each prospective purchaser (R.A. 8799, Chapter III, Sec.
8).
• Grounds for rejection and revocation of securities
◦ The Commission may reject a registration statement and refuse registration
of the security thereunder, or revoke the affectivity of a registration statement
and the registration of the security thereunder after the due notice and
hearing by issuing an order to such effect, setting forth its finding in respect
thereto, if it finds that:
▪ The Issuer
• Has been judicially declared insolvent;
• Has violated any of the provision of this Code, the rules promulgate
pursuant thereto, or any order of the Commission of which the issuer
has notice in connection with the offering for which a registration
statement has been filed;
• Has been or is engaged or is about to engage in fraudulent
transactions;
• Has made any false or misleading representation of material facts in
any prospectus concerning the issuer or its securities;
• Has failed to comply with any requirements that the Commission may
impose as a condition for registration of the security for which the
registration statement has been filed; or
▪ The registration statement is on its face incomplete or inaccurate in any
material respect or includes any untrue statements of a material fact
required to be stated therein or necessary to make the statement therein
nor misleading; or
 ▪ The issuer, any officer, director or controlling person performing similar
functions, or any under writer has been convicted, by a competent judicial
or administrative body, upon plea of guilty, or otherwise, of an offense
involving moral turpitude and/or fraud or is enjoined or restrained by the
Commission or other competent or administrative body for violations of
securities, commodities, and other related laws.
• The above-mentioned provisions are the grounds for revocation and
rejection of registration of securities.

Lesson 5 - Department of Trade and Industry and Consumer's Protection Act

Department of Trade and Industry
• The government is in for a lot of work so it needs different departments that will act upon
different roles and responsibilities to maintain order in the nation. In the field of trade and
industry, the nation has the Department of Trade and Industry or DTI.
• Department of Trade and Industry or DTI is a government department in charge of being a
catalyst for innovation and growth of the economy through maintaining an efficient and
fair business environment. The department was originally a separate department of trade
and another for the industry, yet eventually, it was enjoined together. As it was stated in the
Department of Trade and Industry official website, the department’s works are anchored on
the values of Passion, Integrity, Competence, Creativity, Synergy, and Love of Country. It
aims, “A more inclusive and prosperous Philippines with employment and income
opportunities for all,” as a part of their Vision 2020.
• The department is currently eyeing and looking forward to 2022 with an increased rate of
direct investment from both local and foreign investors, more competitive, innovative, and
resilient industries and services, improved finance, production network, market access, and
safe and good quality goods and services for consumers. The department is very positive
that they will achieve these things with all their ongoing programs.
• The foundation of the department was mandated by four major laws or a legal basis,
namely:
◦ Presidential Decree 4BB stating the establishment of a Department of Industry, aimed
to help the growing industry of the country to flourish, signed, June 21, 1974.
 ◦ Presidential Decree 722 contains the establishment of the Department of Trade and
Bureau of Foreign Trade to cater to the socio-economic development of the country in
terms of commercial practices as well as push through domestic marketing and trade,
signed, June 2, 1975.
◦ Executive Order 709 established a Ministry of Trade and Industry which acted upon the
duties of the then abolished Department of Trade and of Industry, signed, July 27, 1981.
◦ Executive Order 133 made some changes with the Ministry of Trade and Industry then
called it Department of Trade and Industry, signed, February 27, 1987.

• Other Private and Public Agencies where DTI is Closely Related To

◦ It is not a common concept that government agencies and departments partner with
other agencies in and out of the public sector to achieve the goal of efficiency and
competitiveness within the department. With this to say, here are the following agencies
that are directly attached to DTI as per the government’s Official Gazette:
▪ Philippine Economic Zone Authority (PEZA)
• It is the agency in charge of promoting investments, assisting, registering, and
granting incentives. It is also responsible for facilitating export-oriented
businesses of different investors located in different areas in the Philippines as
mandated by the PEZA president.
▪ Board of Investments
• It is basically in control of investments, as the name suggests. It also promotes
the act of investing by serving as the one-stop-shop for local and foreign
investors. This bureau guides business investors with different ways and avenues
on how to make their investment worth it and grow.
▪ Intellectual Property Office of the Philippines
• Just like any other thing in this world, business is also a product of the
intellectual ability of a human; therefore, it is a must that there is an agency
fitting to ensure that the Intellectual Property of businesses is properly taken care
of. Intellectual Property Office of the Philippines is one of the administrators
and implementers of policies concerning intellectual property protection.
▪ Subic Bay Metropolitan Authority
• It aims to grow a freeport that can sustain a quality life for all its locators and
stakeholders.
▪ Small Business Corporation
 • This is the agency that looks after the welfare of small and starting businesses.
This agency aims to be an avenue for small businesses to gain capital without
subjecting their business to lifetime debts.
▪ Clark Development Corporation
• This is the government-owned agency that ensures the development and
progress of the Clark Freeport Zone in the Philippines. It aims to contribute to
the growth of the rate of employment and the economy as a whole.
▪ Design Center Philippines
• This agency is focused on maintaining and ensuring that products of the
Philippines are all out of creativity. It aims to put a big in the economic growth
by honing the creative minds of Filipinos and imparting it to business.
• Authorities behind the DTI
◦ An agency, may it be a public or private one, needs someone to administer and initiate
its policies and mandates so as to realize its goal in reality. Therefore, the Department
of Industry, a government agency, also has its administrators who make things in the
department work.
◦ The following are the main administrative positions that lead the department towards
its goals for the nation:
▪ Secretary of Trade and Industry
• The authority and responsibility for the exercise of the mandate of the
Department and for the discharge of its powers and functions are hereby vested
in the Secretary of Trade and Industry, hereinafter referred to as Secretary, who
shall be appointed by the President (as cited from Executive Order No. 133).
◦ The Secretary of the Department carries the duties of being the advisor of the
President with regards to matters concerning trade and the industry;
establishing the orders and policies that will make up to the growth of the
economy aligned to the government programs, supervising all offices
connected to the department, appoint or delegate people that will carry out
duties and functions of the department and many more.
▪ Five Undersecretaries
• The Secretary shall be assisted by five (5) Undersecretaries, who shall be
appointed by the President upon the recommendation of the Secretary (as cited
from Executive Order No. 133).
▪ Assistant Secretaries
 • The Secretary shall also be assisted by five (5) Assistant Secretaries who shall be
appointed by the President upon the recommendation of the Secretary. The
Secretary is hereby authorized to delineate and assign the respective areas of
functional responsibility of the Assistant Secretaries. Within his functional area
of responsibility, an Assistant Secretary shall assist the Secretary and the
Undersecretaries of the formulation, determination, and implementation of laws,
policies, plans, programs, and projects on trade and industry and shall oversee
the day-to-day administration of the constituent units of the Department (as cited
from Executive Order No. 133).
• Programs and Projects Spearheaded by the Department of Trade and Industry
◦ The Department of Trade and Industry, or DTI, is a functioning department that is also
on duty to layout programs and projects that will best benefit the nation’s citizens,
consumers, potential business starters, and even the economy. Here are some of the
programs and projects that DTI launched:
▪ SME Roving Academy
• This training program is accessible or open for small to medium business entities
who wish to step up their businesses to another level. It trains entrepreneurs to
improve their business operations, so they’ll eventually appeal to a bigger
market.
▪ Shared Service Facilities Project
• The goal of this program is to improve the economy by providing machinery and
equipment that will be given to well-deserved MSME’s (Micro Small and
Medium Enterprises).
▪ Great Women Project
• The aim of this project is to empower women in the field of trade and industry
by upgrading policies and programs for them and providing assistance so they
would be able to participate and be involved in the field if they wish to.
▪ Negosyo Centers
• Negosyo Centers were established after the enactment of Republic Act 10644 or
the Go Negosyo Act. This aims to bring government services closer to MSME in
the different areas in the Philippines.
Consumer's Protection Act
• Consumers keep a business going; there would be no businesses, markets, or stores
without consumers. They are the ones who use, consume, or avail themselves of products
and services available in the market. Investopedia stated that consumers could either be an
individual or business that consumes a good or service. Therefore, it is just to say that
consumers are vital aspects of how business goes. Their demands shall be met, and their
safety shall be ensured and protected by businesses and by the government too.
• One step of protecting the consumers is the emergence or implementation of the
Consumer's Protection Act.
• The Consumer Protection Act in the Philippines was tailored and adopted based on R.A.
7394 (Consumer Act of the Philippines of 1991). This act aims to “protect the interests of
the consumer, promote his general welfare and to establish standards of conduct for
business and industry.” It is cited from R.A. 7394 Article 2, that the goal of the act is to
achieve the following objectives:
◦ Protection against hazards to health and safety:
▪ It is the aim of this act to protect consumers from potential or possible harms to
their health and safety, considering sanitations, authenticity, and legal and health
expert approvals of products and services.
◦ Protection against deceptive, unfair, and unconscionable sales acts and practices:
▪ It is also the aim of this act to save the consumers from being deceived by different
scamming practices and other unlawful activities on sales in the market.
◦ Provision of information and education to facilitate sound choice and the proper
exercise of rights by the consumer:
▪ This act aims to discuss and educate consumers on the information about their rights
as a consumer.
◦ Provision of adequate rights and means of redress:
▪ This act also aims to discuss the rights and unfair setups or situations that are
considered a violation of the act and clearly endanger the welfare of the consumers.
◦ Involvement of consumer representatives in the formulation of social and economic
policies:
▪ Social and economic policies in trade and industry involve consumer
representatives who voice consumer experiences, demands, and needs.

• Provisions Stated in the Act with regards to Consumer Product and Quality
 ◦ As cited from R.A. 7394, Chapter I, Article 5, the following are the duties of the state
to its consumers:
▪ To develop and provide safety and quality standards for consumer products,
including performance or use-oriented standards, codes of practice and methods of
tests;
▪ To assist the consumer in evaluating the quality, including safety, performance, and
comparative utility of consumer products;
▪ To protect the public against unreasonable risks of injury associated with consumer
products;
▪ To undertake research on quality improvement of products and investigation into
causes and prevention of product related deaths, illness and injuries;
▪ To assure the public of the consistency of standardized products.
• The above-mentioned provisions emphasized aspects such as standard, quality,
and risks that all businesses should bear in mind in delivering and marketing
their products and services to the market. The conduct of research was also
mentioned, for it will best figure out if a certain product is harmful or not to the
consumers that will potentially purchase it. Standards are also a good point to be
taken care of: products and services shall meet a certain standard so that they
will be considered a product of quality.
• Government Agencies or Departments involved in ensuring the above-mentioned
Provisions are being met by Businesses
▪ According to the provisions stated in R.A. 7394, Chapter I, Article 6, the following
are the government departments involved in taking part in protecting the consumers
of the state, specifically, in line with the provisions above:
• The Department of Health with respect to food, drugs, cosmetics, devices and
substances;
• The Department of Agriculture with respect to products related to agriculture;
• The Department of Trade and Industry with respect to other consumer products
not specified above.
• Things that the above-mentioned Government Agencies should check to consider a product
to be safe for sale in the Market
◦ The following are the things that a product should meet so it can be considered an
approved product to be legally purchased by people:
 ▪ Requirements as to performance, composition, contents, design, construction,
finish, packaging of a consumer product;
▪ Requirements as to kind, class, grade, dimensions, weights, material;
▪ Requirements as to the method of sampling, tests and codes used to check the
quality of the product;
▪ Requirements as to precautions in storage, transporting and packaging;
▪ Requirements that a consumer product be marked with or accompanied by clear and
adequate safety warnings or instructions, or requirements respecting the form of
warnings or instructions (as cited from R.A. 7394, Chapter 1, Article 7).
• The above-mentioned provisions are just some of the provisions stated in the
Republic Act 7394 or Consumer Act of the Philippines of 1991, which will
guide us on our rights as consumers of the state.

Lesson 6 - Consumer Organizations and Consumer Complaint Process

Consumer Organization
• As discussed in the previous module, consumers are those individuals or businesses who
purchase products or services to consume. They are a vital aspect in the business
environment, for they are the reason why business exists. It keeps the business going, for it
uplifts the purpose of the businesses to sell.
• With those things being said, it is a good thing that there are organizations that will cater to
the needs of the consumers and serve as a voice for their demands, concern, and interests,
for businesses to hear so they can align it to their operating strategies.
• Consumer Organizations are groups formed to promote and protect the interests and
welfare of the consumers. It is a non-government and non-profit organization composed of
members. It is after the purpose of formulating advocacies, assistance, and protection for
people who consume goods.
• According to the Department Administrative Order No. 17-07 Series of 2017, a Consumer
Organization is defined as “an organized and independent group that represents a
substantial number of consumers whose membership is voluntary and whose primary
objective is to protect the rights of consumers and to promote their welfare.”
• Since Department Administrative Order No. 17-07 Series of 2017 was revised already, it
was replaced by Department Administrative Order (DAO) 20-07, Series of 2020 or the
“Revised Guidelines on the Recognition of Consumer Organizations (C0s),” stating that
“Consumer Organizations" refer to a group of individuals who organize themselves for a
common cause of promoting the welfare and protecting the rights of consumers.”
• Consumer Organizations are formed not only for the above-mentioned purpose but also to
stand by the side of the consumers and educate them of the information and laws they
might need against abuse or misfit from sellers or businesses who produce, technically, in
actual set up, is armed with a more stable and organized protecting bodies.

• Different Function of Consumer Organizations

◦ As was said in the previous parts of this module, consumer organizations function after
the welfare of the consumers against any unlawful abuse of business entities. It plays
different roles in the lives of consumers in order to protect them and make their rights
respected by the sellers. Below are some of the functions of Consumer Organizations,
cited from an article in Your Article Library, written by Samiksha S:
▪ Increase consumers' knowledge through educating them of their rights;
• One of the most important functions of consumer organizations is to raise
awareness among consumers with regards to their rights and the things that they
need to know about laws on consumption. In order to put this vision into reality,
organizations provide consumers with reading materials where they can get
information on how to be smart consumers, facilitate training and lectures that
discuss and emphasize consumer’s rights, as well as inform them of the different
consumption standards when purchasing/availing products and services.
▪ Tests products and gathers data used for research on consumer's problem
• Responses from consumers serve as the basis of consumer organizations in
deciding how to help them. Consumer organizations also test products
beforehand so they can inform the public of the quality of the product or the
service they might wish to avail themselves.
▪ Lawsuit filing in place of the consumer
• For instance, if a particular seller violated the consumers’ right and he/she does
not have the means to file a case against the seller, the consumer organization is
bound to help them. Filing of the lawsuit will be carried by the organization.
 ▪ Organizes programs or protests to counter cases of adulteration, hoarding, black
market, and other unlawful acts in trade and industry
• In case unlawful acts are happening in the market, consumer organizations
arrange protests to fight against these acts and spread awareness that these
activities exist for the authorities to take over and subject the culprits to
penalties.
▪ Supports government through reporting unlawful acts in business
• Consumer Organizations also act as a support to the government for looking out
for unlawful acts being practiced by businesses in the market; they serve as
watchdogs that lessen wrongdoing so that the market will be a safer place for the
consumers.
▪ Expanding connections among consumers associations
• Consumer Organization creates networks among other consumer organizations,
this way, they will help a larger number of consumers and assist them with their
concerns.
▪ Briefs educational institutions on consumers' interests
• Consumer Organizations gives further information with regards to the interests
of the current consumers so that the preparation of courses, especially in a
course involving business, will be able to learn things that are really happening
in the field, in short, realistic and authentic examples and basis.
• Revised Guidelines in Recognizing Consumer Organizations as per DTI
◦ Department of Trade and Industry, as the sole agency of the government in managing
consumer related concerns and matters in the nation, believes that the role of consumer
organizations in the business environment is vital and it should be given ample amount
of attention for these will represent the views arid opinion of the consumers.
◦ Having to say the former information, the department released a revised guideline in
recognizing nationally acknowledged Consumer Organizations based on the
Department Administrative Order (DAO) 20-07, Series of 2020. Here are some of the
things indicated in the DAO:
▪ ln the revised guidelines, the Consumer Organization can already be classified as
“Enlisted Consumer Organization” when they voluntarily enlist or register their
name. They pay the fee of 150 pesos and submit all the requirements needed. Once
the DTI approves the enlistment, the organization will be classified as local or
national.
 ▪ A previously recognized organization need not to settle the payment of 150 pesos,
for they are automatically listed in the DTI register of consumer organizations.
▪ A Consumer Organization must at least have 5 members for it to be considered a
local CO while it must have at least 3O members for it to be considered a national
CO.
▪ There is no need for a Securities and Exchange Commission or Cooperative
Development Authority certificate to qualify for local or national CO application.
▪ The certificate of recognition that will be given to Consumer Organizations has a
validity of 3 years, provided that it all is not canceled, revoked, or suspended for
certain reasons.
▪ Certificate of Recognition for consumer organizations is being issued during the
celebration of World Consumer Rights’ Day and Consumer Welfare Month which is
every March and October annually.
▪ It was also stated that Consumer Organizations should take part and work alongside
the government programs by joining consultation programs and activities, wherein
data gathered will be used to formulate policies concerning trade and industry in the
nation.
▪ DAO also emphasized the need for Consumer Organizations to submit price
monitoring reports covering basic necessities and prime commodities that will assist
the checking of compliance of business establishments with the provisions of the
Fair Trade Laws (FTLs) by the Department of Trade and Industry.
▪ A consumer organization bearing a certificate of recognition from DTI may also be
a Philippine Delegate to the International Consumer Protection Related Forums.
How Consumer Complaint Works
• Consumers have voices of their own; it is their right to let the sellers know what seems to
be unfitting with their service as well as the things that they actually liked about the
products and services they avail themselves. On the other hand, it is the responsibility of
our sellers to cater to the needs of the consumers. They have to address concerns coming
from the consumers as to what seems to be the problem with the products or services that
they sell on the market. For instance, if the seller did not meet the expectations of
consumers or the products and services they offer have some issues that they have to
address, but did not respond to, it is now a reason for a consumer to use some help from
the agencies coming from the government. Any violation of the Consumer Protection Act
is a serious offense and should be addressed right away.
• The Department of Trade and Industry is after consumers’ welfare, which is why they have
released a step-by-step process on how to file a complaint against any seller who did not
address their concerns properly. They have also made it accessible as they post it on their
social media page, particularly Facebook.
• The department sees complaints as a way to improve their quality of service and
communications continuously. In order to fulfill DTI’s commitment to providing a
response to your feedback that is timely, fair, and professional in all aspects, here is the
process of filing a complaint as cited from the Department of Trade and Industries website
and Official FB page:
◦ Email mediates able concerns on warranties, No return, No Exchange Policies through
national or provincial offices of the department.
◦ Download and fill out a Complaint Letter containing your complete name, address,
email, and contact number.
◦ Narrated happenings or facts.
◦ Your purpose/demand.
◦ Proof of transaction and any government-issued identification, scanned or attached.

• Where Complainant should file their Complaint

◦ Complainants from Metro Manila can send their complaints through email at
consumercare@dti.gov.ph or personally to the director of Fair Trade Enforcement
Bureau, DTI Fair Trade Enforcement Bureau (FTEB) located at UPRC Building 315
Sen. Gil J. Puyat Ave., 1200 Makati City, Philippines.
◦ For the complainants coming from the provinces and towns outside Metro Manila, their
complaints shall be addressed to their respective provincial DTI Offices which is
indicated in the department’s directory.
◦ Here are some government agencies that you can connect to in case your concerns are
about the following:
 Concerns Agency

Price and quality of sugar Sugar Regulatory

products Administration

Products that are Department of Trade and

manufactured Industry

Bureau of Fisheries and

Products in fishery
Aquatic Resources

Restaurant, sidewalk and

LGU City Health Office
eateries

Agricultural products like Bureau of Plant and

fruits and vegetables Industry

Meat and chicken that are

National Meat Inspection
processed and
and Service
unprocessed

Philippines Coconut
Coconut-based products
Authority

Rice products National Food Authority

Rates on telephone, National

cellphone and TV, and Telecommunications
radio broadcasts Commission

Banks and non-banks

Banko Sentral ng Pilipinas
with quasi-bank function
 • The abovementioned process will just be followed in the event that the seller did not
respond to your complaint as a consumer. Before taking these steps, make sure that you
are able to contact and communicate your concern to the sellers themselves so that
matters will be resolved without any inconveniences on your part as a consumer and
also on the part of the sellers.
• Next steps after a complaint is filed
◦ Part of your rights as a consumer is the right to redress, meaning you have the right to
be paid an amount for the reason of discrepancies with products and services you
encountered from a certain seller. Once no action was done with regards to this, the
following events are deemed to follow, as cited from an article of The Manila Times:
▪ If the right to redress was not fulfilled and no action was taken by the sellers to
settle your concerns, as was said a while ago, that is already the time that you can
already file a complaint to the DTI.
▪ Once the complaint is already filed and received by the department, DTI will
incorporate the Alternative Dispute Resolution Technique, with which it will try to
settle the concern through mediation and amicable settlement.
▪ If in case the mediation process does not work, then the case will be raised to the
arbitration officer, who will then review the evidence and eventually make a sound
judgment enforceable to both parties, based on the evidence presented.
▪ It depends upon the gravity of the case, whether the case will already have a
decision at a short period of time, but the department is trying their efforts to make
quick responses so as not to delay rightful penalties and compensations on the part
of both consumers and sellers.
▪ If the case does not directly involve the efforts of the Department of Industry.
• Complaints or Cases covered by DTI's authority
◦ As per Department Administrative Order No. 07 Rule III Section 1, the following are
the cases covered under the jurisdiction of arbitration officers of the Department of
Trade and Industry:
▪ Cases filed by consumers for violations of the Consumer Act. The rules herein that
will govern are, all the rules which apply to violations of the Consumer Act. If the
complainants are DTI offices or agencies (motu proprio), the rules which will apply
are those below:
 • Any complaint against violation of the provision indicated in the Consumer
Protection Act is covered by the jurisdiction of DTI and should undergo the
same process as the procedure indicated in DAO No. 07.
▪ Cases filed by natural or juridical persons or by DTI offices or agencies (motu
proprio) for violations of Trade and Industry Laws. The rules herein that will govern
are, all the rules which apply to violations of Trade and Industry Laws.
• Any case filed by the persons of DTI offices and agencies as a complaint about
violation of Trade and Industry Laws are also subjected to the rules and
procedure present in DAO No. 07.
▪ Cases filed by natural or juridical persons or by DTI offices or agencies (motu
proprio) for violations of the Price Act (R.A. No. 7581) and its implementing rules
and regulations. The rules herein that will govern are, all the rules which apply to
violations of Trade and Industry Laws.
• Those cases that violate the Price Act even if there is no request for complaint
from the other party shall still be subjected to undergo the procedure present in
DAO No. 07.
• Time Given to File a Complaint for it to be considered Valid
◦ As it was stated in Department Administrative Order No. 07 Rule VIII Sections 1 and
2, there is a time period when you can actually file a complaint or formal charge against
violators of Acts involving trade and industry. Here are the provisions discussing these:
▪ Any complaint of a consumer (as defined under Section 1(a), Rule II of this Order),
for violation of the Consumer Act, shall be filed within two (2) years from the time
the consumer transaction was consummated, or the deceptive or unfair and
unconscionable act or practice was committed, or in case of hidden defects, from
the date of discovery thereof. After the said period, the filing thereof shall be barred
(Section 1, Prescription of Actions Under the Consumer Act).
• A complaint against violation of the Consumer Protection Act shall be filed
within two years dated from the day the incident happened or was discovered. If
you fail to file a case during the time period indicated, the case will not be
considered a case anymore.
 ▪ Any other complaint or formal charge shall be filed within three (3) years from the
date of the commission of the violation/offense, or if such date is unknown at that
time, then within three (3) years from the date of discovery thereof. After the said
period, the filing thereof shall be barred (Section 2, Prescription of Actions Under
Other Cases).
• Complaints not considered a violation of the Consumer Protection Act shall be
filed within 3 years as the action was committed or happened or discovered. If
you fail to file a case during the time period indicated, the case will not be
considered a case anymore.
• Penalties Imposed Against the Respondent if the Complaint is Proven
◦ Here are the following penalties/sanctions that will be imposed against the respondent
once proven of the violation of Consumer Protection Act as cited from Department
Administrative Order No. 07 Rule XIII Section 2:
▪ The Adjudication Officer shall have the power to impose administrative penalties
upon the respondent, if warranted, and even if these have not been prayed for by the
complainant, to wit:
• For the violation of the Consumer Act:
◦ The issuance of a Cease and Desist Order (CDO), which shall be embodied
in the decision: Provided; however, That such order shall specify the acts that
the respondent shall cease and desist from and shall require him to submit a
report of compliance therewith within a reasonable time (Section 2,
Imposition of Administrative Penalties);
▪ If the respondent was proven to violate the provisions of Consumer
Protection Act, a Cease-and-Desist Order will be issued containing the
decision on the case, yet the order should also contain specifications of
acts that the respondent shall cease and desist, along with the notification
that it needs to submit a report of compliance.
▪ The acceptance by the Adjudication Officer of a voluntary assurance of compliance
or discontinuance from the respondent which may include any or all of the
following terms and conditions:
• An assurance to comply with the provisions of R.A. No. 7394 and its
implementing rules and regulations;
• An assurance to refrain from engaging in unlawful acts and practices or unfair or
unethical trade practices subject of the adjudication;
 • An assurance to comply with the terms and conditions specified in the consumer
transaction subject of the complaint;
• An assurance to recall, replace, repair, or refund the money value of defective
products distributed in commerce; and
• An assurance to reimburse the complainant out of any money and/or property in
connection with the complaint, if any, and to file a bond to guarantee compliance
therewith.
◦ The report of compliance should contain an assurance that the respondent
will comply with all or any of the above-mentioned provisions indicated in
R.A. 7394.
▪ Said acceptance does not require as a condition precedent, the consent of the
complainant.;
▪ The restitution or rescission of the contract without damages;
▪ The seizure and condemnation of the consumer product/s found to be hazardous to
health and safety unless the respondent files a bond issued by an accredited bonding
company, equivalent to ten percent (10%) of the value of the seized or condemned
items, or such other percentage as may be determined by the Adjudication Officer,
to answer for any damages or injury that may arise from the continued use of the
product.
▪ The Imposition of an administrative fine in such amount as deemed reasonable by
the Adjudication Officer, which shall in no case be less than five hundred pesos
(P500.00) nor more than three hundred thousand pesos (P300,000.00) depending on
the gravity of the offense, and the additional administrative fine of not more than
one thousand pesos (P1,000.00) for each day of continuing violation;
▪ Other penalties provided elsewhere in the Consumer Act.
• Even if the adjudication officer accepted the report of compliance containing the
assurance coming from the respondent, it does not mean that it is a condition for
the case to be dissolved, nor will it still let the hazardous products be
continuously available in the market.
• Fine amounting to no less than P500.00 or more than P300,000.00, depending
on the gravity of the offense. The administrative fine amounting to P1,000.00 for
each day of continuously violating the provisions shall be settled and paid by the
respondent.
Lesson 7 - Securities Regulation Code of the Philippines
Security
• Security plays a very important role in the business environment. It gives options to
investors and simplifies the investment process though it does not remove the problems in
the aspect of investment. It contributes to the formation of capital, liquidity, and
management of risks. The presence of the Securities Markets brings collateral benefits to
the economy and the companies.
• Investopedia defines security as a financial instrument with a monetary value that can be
traded and interchanged with another asset of the same type and value. It is used to gain or
raise capital both in the public and private aspects of the market. Securities can be
classified as equity, debt, hybrid, or derivatives.
• In the Philippines, securities are being regulated and managed by the Securities and
Exchange Commission of the Philippines.
• Types of Securities
◦ Equity
▪ This has something to do with owning a share in a certain company through
investing in the company stocks.
◦ Debt
▪ This is much safer than stocks and comes in the form of bonds and loans granted by
companies and the government.
◦ Hybrid
▪ This type of security combines the characteristics of both Equity and Debt. This
includes equity warrants and convertible bonds.
◦ Derivatives
▪ This is the most risky option of security than stocks and bonds. It can be derived
from stocks and bonds and also include futures contracts.
• Situations Showing How Investment in Securities Works
◦ Situation 1 (as cited from My Accounting Course website)
▪ Arnold acquired ownership rights to the company when he bought 50 stocks in the
Jollibee Corporation, and he will have the right to collect a significant payment
from the company’s dividend payments. He did this with the knowledge that stocks
frequently trade and hold a high return potential.
◦ Situation 2 (as cited from My Accounting Course website)
 ▪ In the aim to go on the safe side of things, Alyanna put 30% of her money in
government bonds; therefore, she got legal proof of purchase and acquisition of
government bonds acknowledging her ownership to the security and a credit
relationship with the Philippine Government.
Securities Regulation Code of the Philippines
• As it was mentioned in the previous part of this module, securities in the Philippines are
being regulated by SEC or the Security and Exchange Commission. While it is being
regulated by the commission, of course, it is deemed true that the commission follows a
certain set of laws to tell whether compliance to the rules or violation of the law on
securities actually exists.
• Republic Act No. 8799, also known as the Securities Regulation Code of the Philippines, is
the primary basis of the Securities and Exchange Commission in regulating securities and
transactions involved with it. It is enacted by the Senate and House of Representatives of
the Philippines.
• Here are the Chapters that the code contains for your reference:
◦ Chapter I Title and Definitions
◦ Chapter II Securities and Exchange Commission
◦ Chapter III Registration of Securities
◦ Chapter IV Regulation of Pre-Need Plans
◦ Chapter V Reportorial Requirements
◦ Chapter VI Protection of Shareholder's Interest
◦ Chapter VII Prohibitions and Fraud, Manipulation, and Insider trading
◦ Chapter VIII Regulation of Securities Market Professionals
◦ Chapter IX Exchanges and other Securities Trading Markets
◦ Chapter X Registration, Responsibilities and Oversight of Self-Regulatory
Organizations
◦ Chapter XI Acquisition and Transfer of Securities and Settlement of Transaction in
Securities
◦ Chapter XII Margin and Credit
◦ Chapter XIII General Provisions
• Sole Purpose of the Securities Regulation Code of the Philippines
 ◦ The State shall establish a socially conscious, free market that regulates itself,
encourage the widest participation of ownership in enterprises, enhance the
democratization of wealth, promote the development of the capital market, protect
investors, ensure full and fair disclosure about securities, minimize if not totally
eliminate insider trading and other fraudulent or manipulative devices and practices
which create distortions in the free market. To achieve these ends, this Securities
Regulation Code is hereby enacted (cited from R.A. No. 8799, Chapter 1, Section 2,
Declaration of State Policy).
▪ It is the purpose of this code to help the state establish a well-regulated and
conscious free market, encourage vast partaking in owning enterprises, democratize
wealth, promote the progress of the capital market ensure, the safety of investors,
guarantee full disclosure of securities, and at least lessen manipulative and abusive
practices in trade in the free market.
• Authorities Responsible for Regulating Securities in the Philippines
◦ This Code shall be administered by the Security and Exchange Commission
(hereinafter referred to as the “Commission”) as a Collegial body, composed of a
chairperson and four (4) Commissioners, appointed by the President for a term of (7)
seven years each and who shall serve as such until their successor shall have been
appointed and qualified. A Commissioner appointed to fill a vacancy occurring prior to
the expiration of the term for which his/her predecessor was appointed, shall serve only
for the unexpired portion of their terms under Presidential Decree No. 902-A. Unless
the context indicates otherwise, the term “Commissioner” includes the Chairperson
(cited from R.A. No. 8799, Chapter II, Section 4, Administrative Agency).
▪ The sole authority that will partake in implementing the provision in this code is the
Security and Exchange Commission which will be led by a chairperson and four (4)
commissioners. All are appointed by the President of the Republic and will serve for
7 years only. If there is an instance that a new commissioner will replace the former
one who is not yet finished serving the entire 7 years, the commissioner who
replaced the former one will just serve for the remaining time left as the previous
commissioner.
• Power and Functions that the SEC Holds
◦ The commission shall act with transparency and shall have the powers and functions
provided by this code, Presidential Decree No. 902-A, the Corporation Code, the
Investment Houses Law, the Financing Company Act, and other existing laws. Pursuant
thereto the Commission shall have, among others. the following powers and functions
(cited from R.A. No. 8799, Chapter II, Section 5, Powers and Functions of the
Commission):
▪ Have jurisdiction and supervision over all corporations, partnerships or associations
who are the grantees of primary franchises and/or a license or a permit issued by the
Government.
• The power and function of the commission include the jurisdiction and
supervision of the commission to all business entities who are granted a license
or permit to operate by the government.
▪ Formulate policies and recommendations on issues concerning the securities
market, advise Congress and other government agencies on all aspect of the
securities market and propose legislation and amendments thereto.
• It is also the commission’s duty to come up with policies and recommendations,
advise Congress and other government agencies, and propose legislation and
amendments with regard to the country’s securities market.
▪ Approve, reject, suspend, revoke, or require amendments to registration statements,
and registration and licensing applications.
• The commission also functions as the entity to approve, reject, suspend, or
require amendment of any registration and licensing applications.
▪ Regulate, investigate, or supervise the activities of persons to ensure compliance.
▪ Supervise, monitor, suspend or take over the activities of exchanges, clearing
agencies and other SROs.
▪ Impose sanctions for the violation of laws and rules, regulations, and orders, and
issued pursuant thereto.
• The power and functions of the commission also include investigation and
supervision of activities where persons are involved to guarantee compliance to
the provisions of the code.
• Taking control of the operation of other exchanges and clearing agencies as well
as other SROs are also the commission’s power.
• Subjecting entities to sanctions for violating provisions herein the code and the
policies implemented by the commission itself is also a function of SEC.
 ▪ Issue cease and desist orders to prevent fraud or injury to the investing public.
▪ Punish for the contempt of the Commission, both direct and indirect, in accordance
with the pertinent provisions of and penalties prescribed by the Rules of Court.
▪ Compel the officers of any registered corporation or association to call meetings of
stockholders or members thereof under its supervision.
• It is also under the wings of the commission to make an operation or activity
stop to prevent any fraud or injury that will harm the investing public.
• The commission also has the power to punish entities if contempt against the
commission was committed.
• It has the power to summon officers of registered corporations or associations to
call meetings of stockholders or members.
▪ Issue subpoena duces tecum and summon witnesses to appear in any proceedings of
the Commission and in appropriate cases, order the examination, search and seizure
of all documents, papers, files and records, tax returns and books of accounts of any
entity or person under investigation as may be necessary for the proper disposition
of the cases before it, subject to the provisions of existing laws.
• The commission can summon witnesses, order the production of evidence, and
search for files and documents that will be used for any proceedings that the
commission needs to settle, subject to the investigation for any violation against
the existing laws.
▪ Suspend, or revoke, after proper notice and hearing the franchise or certificate of
registration of corporations, partnership, or associations, upon any of the grounds
provided by law.
▪ Exercise such other powers as may be provided by law as well as those which may
be implied from, or which are necessary or incidental to the carrying out of, the
express powers granted the Commission to achieve the objectives and purposes of
these laws.
• When proven that there is a violation or there is a ground for revocation or
suspension of franchise or certificate of registration of corporations,
partnerships, and associations, the commission has the power to take action.
• Any other power, may it be implied or stated, that involves the purpose of the
commission shall be exercised by the commission.
• Requirements for the Registration of Securities
 ◦ Securities shall not be sold or offered for sale or distribution within the Philippines,
without a registration statement duly filed with and approved by the Commission. Prior
to such sale, information on the securities, in such form and with such substance as the
Commission may prescribe, shall be made available to each prospective purchaser
(cited from R.A. No. 8799, Chapter III, Section 8, Requirements of Registration of
Securities).
▪ No securities shall be out to the market if it is not yet officially registered and
approved by the commission.
◦ The Commission may conditionally approve the registration statement under such
terms as it may deem necessary.
◦ The Commission may specify the terms and conditions under which any written
communication, including any summary prospectus, shall be deemed not to constitute
an offer for sale under this Section.
▪ The commission may approve the registration statement of an entity under a
condition and terms proven to be necessary.
◦ A record of the registration of securities shall be kept in Register Securities in which
shall be recorded orders entered by the Commission with respect such securities. Such
register and all documents or information with the respect to the securities registered
therein shall be open to public inspection at reasonable hours on business days.
▪ Records of all registration of securities shall be stored and kept in the Register
Securities and shall be made available for public inspection during official hours on
business days.
◦ The Commission may audit the financial statements, assets and other information of
firm applying for registration of its securities whenever it deems the same necessary to
insure full disclosure or to protect the interest of the investors and the public in general.
▪ The commission has the power to conduct a further audit of statements, assets, and
other information about a firm who wishes to register its securities to ensure that no
interest will be harmed and there is a full disclosure of information deemed
necessary for the registration.
• Code's Provisions Regarding the Rejection and Revocation of Registered Securities
◦ The Commission may reject a registration statement and refuse registration of the
security there-under, or revoke the affectivity of a registration statement and the
registration of the security there-under after the due notice and hearing by issuing an
order to such effect, setting forth its finding in respect thereto, if it finds that (cited
from R.A. No. 8799, Chapter III, Section 13, Rejection and Revocation of Registration
of Securities):
▪ The issuer:
• Has been judicially declared insolvent.
◦ Security registration can be suspended or revoked once the issuer has been
proved and declared insolvent (his/her total liabilities exceed his/her total
assets).
• Has violated any of the provision of this Code, the rules promulgate pursuant
thereto, or any order of the Commission of which the issuer has notice in
connection with the offering for which a registration statement has been filed.
◦ If the issuer was proven to violate any provision indicated in this code, the
security registration would be revoked or suspended.
• Has been or is engaged or is about to engage in fraudulent transactions.
• Has made any false or misleading representation of material facts in any
prospectus concerning the issuer or its securities.
◦ If the issuer has been involved and is currently involved in any fraudulent
activity, then the registration of security will be considered suspended or
revoked.
◦ If the issuer had made any false or misleading representation of facts in any
prospectus (a legal document containing information about an investment
offered in public for sale), the registration might be subjected to suspension
or revocation.
• Has failed to comply with any requirements that the Commission may impose as
a condition for registration of the security for which the registration statement
has been filed.
◦ If the issuer was not able to complete the requirements that the commission
needs for the registration of securities, then it can be subjected to revocation
or suspension.
 • The registration statement is on its face incomplete or inaccurate in any material
respect or includes any untrue statements of a material fact required to be stated
therein or necessary to make the statement therein not misleading.
◦ If the statement of registration is in itself incomplete or inaccurate, it can be
revoked or suspended.

Lesson 8 - Financial Market Regulation

Financial Market
• Finance and the market are indeed a powerful combination of words and concepts in the
business environment. Finance has something to do with huge amounts of money or in
action; it means the supply of funds to a certain thing, individual, or entity. On the other
hand, a market is defined as a location or place where buyers and sellers can meet to
exchange or facilitate a transaction on products or services. When combined, these two
words create a whole new concept and a larger idea to deal with.
• Financial Market is defined as the place where trade happens. It is a venue for selling and
exchanging financial instruments such as bonds, stocks, futures contracts, derivatives, fund
units, and other fungible or freely exchangeable assets, even commodities. Often it is
associated with the capital market and a lot more other concepts in business. It is an
important aspect of the business environment, for it serves as an avenue for a smooth
transaction between investors and businesses.
• Financial Markets have also evolved from what they were before. As time changed,
financial markets changed too. Nowadays, trade is not only being made personally or in a
physical setup; with the help of technology, financial markets today have been digitally
available too. Because of this, financial markets have been more accessible and helpful
today than they were ever before.
• Functions of a Financial Market
◦ As mentioned in the initial part of this module, the financial market is deemed vital to
the business and investors. It is for that reason that financial markets serve many
functions; some even are considered functions that it is only the one who can perform.
◦ Let us take a look at some of the functions of the Financial Market that greatly helps
and affect the business environment of every nation as cited from
corporatefinanceinstitute.com:
▪ It influences or determines prices of securities.
 • Just like in the system of goods with which their prices are determined by the
law of supply and demand, in securities, the financial market is one of the
entities that affect or determine costs of securities.
▪ It converts financial assets into liquid.
• Securities can be used as an instrument for trade. In financial markets, you can
freely do trade using the securities that you own.
▪ It reduces transaction costs.
• In financial markets, not every information costs an amount; therefore,
transactions are inexpensive, and sometimes it does not need spending
▪ It gives savings a more productive use.
• Financial markets give you the opportunity to use your money in many ways. It
is unlike making your money sit on the banks. It gives purpose to your money,
with you getting something in return too.
• Importance of Financial Markets
◦ Important, relevant, significant, vital, and more, these things describe Financial
Markets to businesses, investors, and even the economy. It serves a lot of purposes: that
is why it is being seen as important. It also affects a lot of concepts that the business
environment will not afford to lose it.
◦ To show how important Financial Markets are, here is a list of some of the importance
of Financial Markets:
▪ It makes the growth of businesses and the gain of money for entrepreneurs possible,
for it creates liquidity.
▪ It sets a calm vibe on the part of investors, for it creates a confident impression for
them.
▪ Investors that are confident bring a more positive effect on economic stabilization.
▪ It offers an accessible way of gathering information for both investors and traders,
resulting in a low rate of risks.
▪ Financial markets make fair and proper treatment to all kinds of investors or traders,
may they be small or big, resulting in them feeling at ease.
▪ Capital has been very much accessible because of Financial Markets.
▪ Financial markets also play an important role in a country’s employment rate, for its
existence creates more jobs, eventually reducing the unemployment.
• How Financial Markets Works
 ◦ The system where financial markets work is both a complex and an easy thing. It
basically involves three important factors or elements, the investors, the borrowers, and
the financial market.
◦ Financial Markets create a connection between the investors who serve as lenders and
the government and companies which serves as the borrowers.
◦ To show you the connection of the three basic concepts or elements in the financial
market process, here is a diagram to show you a glimpse of what it is.

• Types of Financial Markets

◦ Financial Market is not just a single broad thing, it has its many types which are distinct
from each other. Let us take a look at the different types of Financial Markets and how
they differ from each other as cited from Investopedia:
▪ Over-the-Counter Markets
• Over the counter markets do not have a physical location that will cater to their
clients. Instead, it just operates digitally or electronically. This fact about the
over-the-counter markets says something about what kind of markets are being
recognized as this type. Markets under the Over-the-Counter type of market are
usually smaller and do not have the ability to fund a physical transaction, so it
just opts to use technology instead. Best Market, Venture Market and Pink Open
Market are some of the networks being established by OTC Market.
▪ Bond Markets
 • It is also called debit, credit, or fixed income market. It sells securities like notes
and bills. It is usually used to fund projects and operations in both public and
private entities. It includes the selling of treasury notes, treasury bills, and the
like.
▪ Money Markets
• Money markets sell securities at both wholesale and retail levels. It typically
trades those that are highly liquid and have a short-term maturity. At the
wholesale level, the trade is between the trader and an institution and usually
involves a large sum of trade, while at the retail level, trade involves individual
investors and bank customers.
▪ Forex Market
• It is also called a Foreign Exchange Market. It involves currencies in trade. It
includes the participation of banks, commercial companies, and many more in
its process. It is also being manned by brokers and global networks that made it
accessible too.
▪ Derivatives Market
• Derivatives trade in those that are future acquired securities such as futures
contracts, options, and many more with which values depend upon other
financial instruments. These are commonly known as secondary securities.
Financial Market Regulation
• If financial markets are defined as a place or venue where trade of financial instrument
happens and regulation means management of something, therefore, when combined,
financial market regulation means the management of the system on how financial markets
work. Of course, in a system, it is not always all the time that its blooming flowers or good
things then the role of financial regulation comes in.
• Financial market regulation is a way to ensure that financial markets work efficiently and
effectively as cited by Credit Suisse. This aims to contribute to the foundation of macro-
and micro-economic stability. Also, it seeks to achieve transparency to protect investors
(Giorgio, et. al).
• Financial market regulation is in itself, containing a set of laws and policies that will shield
you from risks and other unlawful practices involving financial markets. These are
established by the government agencies to regulate activities and movements in the
market.
• Purpose of Regulation in the Financial Market
 ◦ As was said in the previous part of this module, financial markets are important and so
are the regulations that will keep its system clean and fair. Here are the following
purposes of Financial Market Regulations:
▪ It keeps fair competition in trading.
▪ It oversees the level of economic activity.
▪ It prevents fraud and other unlawful practices between investors and traders.
▪ It seeks to promote financial stability among institutions.
▪ It sets restrictions for foreign or international entities to involve in domestic and
national matters in financial markets.
• Four Main Regulators of Financial Markets in the Philippines
◦ When there are regulations, it is given that there are also regulators who act upon the
written regulations and act as implementers of the laws and policies with regards to
Financial Markets.
◦ Here are the four regulators of financial markets in the Philippine business setting:
▪ Banko Sentral ng Pilipinas (BSP)
• It is the central bank and monetary authority of the Philippines. It provides
supervision regarding matters of banking, money, and credit. It is in charge of
supervising and ensuring compliance of banks and other financial institutions
performing quasi-banking functions to the law.
▪ Insurance Commission (IC)
• Supervises insurance and reinsurance companies, insurance brokers, mutual
benefit associations, and pre-need companies.
▪ Securities and Exchange Commission (SEC)
• Securities and Exchange Commission is the government agency that holds the
power in matters involving the corporate world, the participants involved in the
capital market, the market of securities and investment instruments, as well as
matters that ensure protection of investors.
▪ Philippine Deposit Insurance Corporation (PDIC)
• It is a government agency that helps maintain financial stability of depositors in
all banking institutions in the country.

Lesson 9 - Analysis of Selected Business Legal Cases, Ethical Issues of the Cases, and
Identifying Essential Facts
Selected Business Legal Case
• Business, as has been proven from the previous modules, is really a complex thing. It
involves a lot of aspects for it to be considered an official and lawful business. Therefore,
if things happen that a business entity violates a law, more so that it harms the interest of
another business, it will be subjected to complaints, which will then build up into a case
that needs to be settled in court.
• Legal cases involving business take a lot of time to be processed. It is subjected to a series
of trials, investigations, or hearings. Evidence is also deemed important to settle these
kinds of matters.
• As it was researched, we have come up to discuss a case that actually happened in the
actual Philippines business setting regarding consumer complaints. Here is the case that we
will be discussing further in this module:

• The case that we will be discussing in this module is under General Register No. 233073,
dated February 14, 2018.
• It is between L.C. Big Mak Burger, Inc. as a petitioner (the one who filed the case) against
McDonald’s Corporation as the respondent (the one complained).
• This case was cited from The LawPhil Project Arellano Law Foundation, a website.
• This contains the Decision of the Republic of the Philippines, Supreme Court Manila, First
Division.
• This case was spearheaded by Associate Justice Noel Gimenez Tijam.
• Digging In to the Case

• This case is a petition for review on Certiorari, meaning it is a case where the Supreme
Court (a higher court) reviews the lower court’s decision on this case.
• This case began on February 2, 2017, and the resolution date was July 25, 2017, by the
Court of Appeals.
• Identifying Essential Facts on the Case
◦ Here are the factual antecedents of the case L.C. Big Mak Burger, Inc., Petitioner vs.
McDonald's Corporation, Respondent.

• The petition to the case began with the Civil Case No. 90-1507 filed in the Regional
Trial Court of Makati City, Branch 137 (Infringement Court) with which McDonald’s
Corporation (respondent) filed a case of trademark infringement and unfair competition
against L.C. Big Mak Burger, Inc. (petitioner).
• Do not be confused with the terms respondent for McDonald’s and petitioner for L.C.
Big Mak: those were the status and role of the two parties in this petition case.
• ln the previous case where the two parties were involved, the court ordered the
petitioner or the L.C. Big Mak Inc. to cease from practicing particular actions under the
issuance of the writ of preliminary injunction (this means a court order an individual or
entity to perform or restrain from doing a specific act).
• L.C. Big Mak Inc was ordered to refrain from using any term that may associate or
confuse their products originating from the McDonalds Corp. It emphasized that the
petitioner (L.C. Big Mak Inc) should especially cease the use of the mark “Big Mak” in
particular.

• Also, the court ordered the petitioner (L.C. Big Mak Inc.) to cease any market action
that may lead to professing that the respondent (McDonald Corp.) took part in
manufacturing the goods they produce.
 • The Infringement Court also ordered that petitioner cease the use, direct or indirect, of
any term or mark that may associate their company, product, or services to the
respondent in places under and within the jurisdiction of the National Capital Judicial
Region.

• Once the trial ended, the court made a decision to dispose of the case where the
respondent’s side was the one favored (McDonald’s Corporation and McGeorge Food
Industries Inc.) against the petitioner (L.C. Big Mak Burgers, Inc).
• Contents of the Court's Decision in Favor of the Respondents
◦ The issued writ of a preliminary injunction in the case was made permanent.

• The petitioner was ordered to pay certain amounts as compensation for actual damages,
exemplary damages, attorney's fees, and fees of litigation to the respondent.

• Complaints and counterclaims made against the defendants, who happen to be the
people on the side of the petitioner, are declared dismissed for lack of merit and
sufficient evidence.
 • Though the CA overturned and released another decision regarding this case, the
Supreme Court eventually reinstated the Infringement’s Court Decision with which the
instant petition was granted and the decision to find the respondent liable for trademark
infringement competition and unfair competition as the respondent filed.

• In the implementation of the Infringement Court’s decision, it issued a Writ of Execution

(or taking possession of assets in accordance with the judgment).
• Long after the issuance of the court of the Writ of Execution, on May 5, 2008, the
respondent filed a Petition for Contempt (summon to explain) against the petitioner.
• The respondent’s actions were driven by its allegations that the petitioner is still
disobeying and ignoring the judgment obligation as it is still using the word “Big Mak.”
Also, it was alleged that the petitioner did not really pay the respondents for the damages
ordered by the court in the case.
• As an official response by the petitioners, here are the statements made:
◦ They denied that they did not pay the judgment debt ordered by the court from the
last decision, they claimed that they even offered to tender payment via a sheriff, yet
the respondent refused on accepting it for it demanded that payment be made
directly to the respondent.
◦ Also, the petitioner raised an argument that they don’t use the term Big Mak
anymore for it was only decided that the prohibition of use will just cover the term
“Big Mak” and not “L.C. Big Mak Burger, Inc.” and they are just merely using the
company name and not the prohibited term “Big Mak.”
◦ They also argued that they have ceased selling a product called Big Mak burgers
anymore since the decision of the Supreme Court was made.
◦ Also, it stated that stall names were also changed into “Supermak” in accordance
with the court order.
◦ The petitioner also argued that the preliminary injunction issued by the court only
mentioned that it is enforceable within the National Capital Judicial Region
jurisdiction.
• Because of the above-mentioned statements made by the side of the petitioner, LC. Big
Mak Burger, Inc. and Francis Dy, the RTC-Makati Branch 59, came up with a decision
On April 7, 2014, in favor of the petitioner.
• The decision on the instant petition of the respondent for lack of merit is dismissed.
• Also, the court ordered that the respondent pay the petitioner of the abovementioned
sums of money as payment for the damages the case filed have brought the petitioner.
 • But due to an appeal, the CA reversed the Contempt Court’s ruling and declared that
the petitioner was guilty of indirect contempt.
• The present was granted, the previously made decision was reversed, finding L.C. Big
Mak Burger, Inc. guilty of indirect contempt.
• Because of this decision, the petitioner was ordered to pay a fine and is ordered to also
comply with the previous ruling made by the Supreme Court.

• The petitioner attempted to reverse the decision by filing a motion of reconsideration,

which was eventually denied.
• The decision made on February 2, 2017, is hereby stayed and previously promulgated
that caused this petition.
Ethical Issues on the Case
• Ethical Issues means there are certain actions that do not sit right to the moral principles of
the environment, in this case, that we are discussing, business environment.
• Ethical Issues actually sum up situations or scenarios in business that have moral standards
in question.
• The case G.R. No. 233073 L.C. Big Mak Burger, Inc., Petitioner vs. McDonald’s
Corporation, Respondent, includes the following ethical issues mentioned in the case itself.

• Unfair Competition
◦ In the previous plight of this case, it actually began with the issue of unfair competition
filed against L.C. Big Mak Burger Inc. by McDonald’s Corp. An issue of unfair
competition was established because both parties are into the food service industry,
therefore, these are considered competing establishments or entities in the food selling
market. It became a case when confusion happened with regards to the marks being
similarly used in the operations of both firms. It also includes or is associated with the
issue of Trademark Infringement.
◦ Because of this case filed by the respondent against the petitioner, here are the previous
decisions made by the Infringement court about it:
• Indirect Contempt
◦ Indirect contempt is a term used to describe a situation wherein a certain firm or entity
is alleged to disrespect the decisions of the ruling court by disobeying the orders it
released as well as ignoring the weight of its decisions.
◦ This issue emerged when the McDonald’s Corp. filed a Petition of Contempt against
the L.C. Big Mak Burger Corp. for it stated that the petitioner:
 • Whereas the response of the L.C. Big Mak Burger Inc. to these allegations contains:

• Though the court's initial decision about this is in favor of the petitioner L.C. Big Mak
Burger Inc., eventually it was reversed, resulting in the following decision:

Lesson 10 - Relevant Laws, Analysis of the Court, Judiciary Procedures, and Court
Decision Analysis and Reflection
Relevant Laws in the Case
• Laws are a very relevant aspect of a case. This contains the provisions for all fields of
living. Business laws involve the laws needed in the case that we will be discussing in this
module.
• A case will never be a case without laws; there would not be any complaints if there were
no laws being violated. In this module, we will discuss the particular laws involved in the
case of McDonald’s Corp. vs. L.C. Big Mak Burger Inc. which was a petition case after a
series of other cases regarding this matter.
• The Law on Indirect Contempt
◦ The current petition case that we are discussing right now is just focused on the issue of
indirect contempt as accused by the respondent, McDonald’s Corporation, towards the
petitioner, L.C. Big Mak Burger Inc. Other cases regarding Unfair Competition and
Trademark Infringement are deemed to be excluded in this petition.
▪ After a charge in writing has been filed, and an opportunity given to the respondent
to comment thereon within such period as may be fixed by the court and to be heard
by himself or counsel, a person guilty of any of the following acts may be punished
for indirect contempt (cited from Section 3, Indirect Contempt to be Punished after
Charge and Hearing):
• As stated beforehand, the only issue that will be tackled in the court’s resolution
is whether or not the petitioner is guilty of accusations of indirect contempt.
• Indirect contempt is an issue under the law of the court.
• Cited from Sec. 3, Rule 71 of the Rules of Court, it is stated that the punishment
for those entities or individuals who may be proved to be guilty as charged of
indirect contempt will be imposed right after the filing of the charge and the
hearing of the case with which parties and its counsel were given the opportunity
to comment on the allegations at hand.
▪ Disobedience of or resistance to a lawful writ, process, order, or judgment of a
court, including the act of a person who, after being dispossessed or ejected from
any real property by the judgment or process of any court of competent jurisdiction,
enters or attempts or induces another to enter into or upon such real property, for the
purpose of executing acts of ownership or possession, or in any manner disturbs the
possession given to the person adjudged to be entitled thereto;
• This is one of the actions that may be punishable under indirect contempt.
• It involves the refusal to follow writs, process, order, or judgment of a court.
• It also involves those individuals and entities who ignored the order of
dispossession and ejection by the court from any property and are still in action
accessing the property to own it or possess it all over again.
 • Indirect contempt also involves the act of creating disturbing actions to the
possession of an individual entitled to the property as ordered by the court.
▪ Any abuse of or any unlawful interference with the processes or proceedings of a
court not constituting direct contempt under Section 1 of this Rule;
• It also includes those acts of abuse or interference to the process of the court as
long as it is not stated to the provisions of Section 1 of the Rule of Court
regarding direct contempt.
▪ Any improper conduct tending, directly or indirectly, to impede, obstruct, or
degrade the administration of justice:
▪ But nothing in this section shall be construed as to prevent the court from issuing
process to bring the respondent into court, or from holding him in custody pending
such proceedings.
• The issue of indirect contempt also includes any improper action that is deemed
inappropriate and degrading on the part of the justice administration.
• Yet it was disclaimed by this section that these shall not be interpreted as a way
to prevent the respondent from being subjected to the court or from keeping
custody of it aligned to pending proceedings.
• Re-examination of the Orders allegedly Defied by the Petitioner
◦ To be familiarized again with the alleged issue of indirect contempt against the
petitioner, L.C. Big Mak Burger Inc., by the respondent, McDonald’s Corp. Here are
the following orders of the court alleged to be defied by the petitioner regarding this
issue:
 • It was ordered by the court that the petitioner refrain or stop from using the mark “Big
Mak” in any of its fast-food restaurants or even other marks that may cause confusion
or may mislead or deceive the public of the origin of its product and services to be
related to the brand of the McDonald’s Corp.
• Also, the court ordered that the petitioner refrain from the use of the mark “Big Mak”
for it will result in unfair trade on the reputation and goodwill of the McDonald’s marks
specifically the mark “Big Mac.”

• The petitioner was also ordered to refrain from doing any activity that may involve the
sale of their products that may create an impression that it is manufactured or originally
produced by the respondent.

• The court also ordered that the petitioner refrains from any activity that may associate
the name or the brand of the respondent to any of its products and services in such
places within the National Capital Judicial Region jurisdiction.
Judiciary Procedures and Court Decision Analysis
• In order for a case to be settled, it needs to undergo judiciary procedures that will
eventually yield to a court decision, which will be the basis of the future actions or
activities of both parties. Also, these judicial procedures are very important to examine
every information and evidence presented to the court carefully. It will also give equal
opportunities for both parties to present both of their arguments to be used in the case
hearing.
• To settle the fiasco between the two entities, the petitioner, L.C. Big Mak Burger Inc., and
the respondent, McDonald’s Corp, the court facilitated a few proceedings.
• Here is the following information regarding the procedures made by the court related to the
case, also the decision of the court in line with this matter:

• The Supreme Court did not agree to the ruling made by the Court of Appeals stating that
Francis Dy mentioned it in the Judicial Affidavit that their party admitted that they just
followed the court’s order in 2009 upon receipt of the complaint from the respondent
accusing them of Indirect Contempt.
• Also, the court did not agree that the petitioner making use of their company name is an
infringement of the trademark of the respondent, making it a violator of the subject
injunction order of the court.

• To support the court’s disagreement with the impression being imparted by the respondent,
it is not true that the petitioner continued the use of the mark “Big Mak” in their
businesses.
• Evidence was actually presented before the court that the petitioner uses the mark “Super
Mak” and its corporate name L.C. Big Mak Burger Inc. in its operations and not the mark
“Big Mak” which was first ordered by the court to refrain from using.
• Also, there were no records taken that will prove Francis Dy’s admission to their
company’s compliance to the court’s decision, that it only began in 2009 under the writ of
execution issued by the then court.
• The Supreme Court assumed that the CA just misinterpreted the phrase used in the
affidavit mentioning “by early 2009.”
• In addition, the photographs presented were just captured in 2009 when there was already
an existing Writ of Execution issued in the previous resolution of the case.
• To support the Supreme Court’s statements in this part of the case, here is a portion of the
judicial affidavit made that served as the basis of the Supreme Court for disagreeing to the
initial allegations of the respondent against petitioners.
• As you can see, there were no admissions made by the petitioner, as was stated by the
Court of Appeals.
• The petitioner’s side was able to answer all the initial questions that the court asked in the
examination of their compliance to the preliminary injunction ordered by the court.
• They even showed proof to support their claims and statements.
• The petitioner’s side also proved that they had already ceased in using the marks ordered to
be prohibited of use by the court, particularly the mark “Big Mak.”
• The petitioner also presented proof and evidence that they actually followed the court’s
previous decision, even in the other aspects of their business.
• They also addressed the source of the evidence they used to prove their claims.
• As was said a while ago, there are no admissions as to such allegations at all.
• The date of capture of the pictures presented does not in itself prove that the action aligned
to the orders the court was just made on those dates.
• It was seen that the changes that the court ordered to be made in the business of the
petitioner, with regards to the infringement and unfair competition case, were put into
action.
• The Supreme Court did not agree to the sustained decision of CA in favor of the claim of
the respondent that the continuous use of the petitioners’ company name is in itself
trademark infringement and indirect contempt to the court’s decision.
• The Supreme Court also stated that the use of the petitioner’s company instead of the mark
“Big Mak” is actually in compliance with the previous court’s preliminary injunction.
 • The sole focus of the petition is to discover whether or not the petitioner followed the
court's decision, regardless of how they did it.
• There are further details on the definition of contempt of court given to prove emphasis.
The Decision of the Court
• Based on the abovementioned details regarding this case, here is the official court decision
adhering to the matter.

• The contempt case is hereby dismissed by the Supreme Court, one with the decision of the
Contempt Court, in favor of the petitioner’s side.
• The instant petition made was granted.
• This assailed decision was dated February 17, 2017, resolution dated July 26, 2017.
• The decision made by the Court of Appeals was hereby reversed and set aside, while the
previous decision made by the Regional Trial Court of Makati City, Branch 59 with
regards to this case is hereby reinstated.
• This is the official decision of the Supreme Court of the Republic of the Philippines.
• Further details on the post case statements: