Abuse of Dominant

Position, Sec. 15 PCA

Sec. 15 – Abuse of Dominant Position
• Being dominant is not prohibited; ABUSE of dominance is prohibited
• “The successful competitor, having been urged to compete, must no
be turned upon when he wins.” – US v. Aluminum Co. of America, 148
F.2d 416, 430
• Commissioner Bernabe: Sec. 15 (a) – (b) are not an exclusive list
• Tim Hughes (PCC Resource Speaker): Sec. 15 (a)-(b) are descriptions
of behaviour that may be considered as abuse of dominant position
Elements of Abuse of Dominant Position
• One or more entities in dominant position
• Conduct that results in SLC
• One of Sec. 15 (a)-(i) or analogous acts
Sec. 15 – Three provisos
• 1st proviso: Acquiring, maintaining, or increasing dominant position is
not prohibited as long as it does not lead to SLC
• 2nd proviso: Conduct which increases production and distribution of
goods and/or promote technical and economic progress is not abuse
of dominance (Efficiency Defence)
• 3rd proviso: PCC and industry regulators are not prevented to pursue
measures that would promote fair competition
Dominant Entity
• Sec. 4(g), PCA defines “dominance” as the ability to control the
relevant market independently from competitors, customers,
suppliers, or consumers
• “market power” is the ability to raise price above the competitive
level without losing so many sales so rapidly that the price increase
becomes unprofitable
Dominant Entity
• Sec. 27, PCA:
• 1st paragraph: Parameters used in determining market share
• 2nd paragraph: Rebuttable presumption of dominance if market share of
entity is at least 50%
• 4th paragraph: Legitimate means of increasing market share are not violations
of the PCA
Evidence of Dominance
• Sec. 4(g) defines “dominance” as the ability to control the relevant
market independently from competitors, customers, suppliers, or
consumers
• “market power” is the ability to raise price above the competitive
level without losing so many sales so rapidly that the price increase
becomes unprofitable
Sec. 15 (a)-(i)
• a) Driving competition out by selling goods below cost (i.e. predatory
pricing)
• Competitor cannot compete with lower prices and is forced out of the market
• Once the competitor is out, dominant player increases prices
• Proviso in Sec. 2 (a) (1) , IRR: Commission may consider that the
dominant player was just reacting, in good faith, to the lower prices
of an existing competitor of a similar product of similar quality (in
which case, there may not be a predatory pricing)
Sec. 15 (a)-(i)
• b) Barriers to entry of prospective competitor; preventing
competitors from expanding
• Does not include exclusion caused by superiority of product, business
acumen, legal rights (e.g. intellectual property rights)
• c) Imposing irrelevant conditions on the transaction, (i.e. tying and
bundling)
• e.g. I will sell you 100 cars only if you will buy 100 horses
• Relevant bundling is possible, e.g. leasing restaurant space with prohibition
on “outside food” (The prohibition may be considered a matter of commercial
usage.)
Sec. 15 (a)-(i)
• d) Discriminatory pricing that have SLC effect, e.g. I will sell at $100 to
John because “MAGA”, but $200 to Ahmed because “immigrants are
stealing our jobs”
• BUT it is ok if:
• it benefits marginalized sector, there are additional costs to delivery (e.g. international v.
domestic delivery), etc.
• Reflects differences in manufacturing costs (machine vs. handmade), delivery costs
(freight shipping vs. air), technical conditions, quantity (bulk vs. individual)
• Change in marketability of goods, e.g. perishable goods are usually sold at lower prices
as their expiry date nears; clear-out sales to free up inventory space/liquidate
Sec. 15 (a)-(i)
• e) Preferential discounts and rebates that have effect of SLC
• Discounts, in general, are pro-competitive because it may encourage
reduction in average price; sellers sell on discount to improve sales
• But if solely loyalty-inducing and/or not based on cost-savings, then can be
considered abuse (Question: “Suki” culture?)
• f) Similar to c)
Sec. 15 (a)-(i)
• g) Buying at outrageously very low prices from small-time producers,
e.g. fisherfolk, farmers, etc.
• Emerging competition issue: Rice Tariffication Law
• h) Monopoly pricing
• If Ceres charged fares higher than the cheapest air ticket to Cebu
• i) Production limits, output restriction, blocking access to technology
development, etc., provided that limitations arising from superiority
of product, legal rights, business acumen shall not be a violation
• Issue: Intellectual property rights; non-competitive agreements