Cases:

Francisco Tatad v. Secretary of DOE and Secretary of DOF

GR No. 124360, 5 November 1997
Petitions to review the constitutionality of RA 8180
Justice Puno

Facts:
 Two consolidated petitions challenging the constitutionality of RA No.
8180 – An Act Deregulating the Downstream Oil Industry and For Other
Purposes, which ended 26 years of government regulation of the
downstream oil industry.

History lesson:
 Prior to 1971, there no government agency regulating the oil industry
other than those dealing with ordinary commodities. Downstream oil
industry was controlled by multi-national companies
 4 refining companies – Shell, Caltex, Bataan Refining and Filoil Refining.
And 6 petroleum marketing companies – Esso, Filoil, Caltex, Getty, Mobil,
and Shell.
 1971 – oil crisis, enactment of Oil Industry Commission Act.
 OIC had the power to regulate the business of exporting, transporting,
processing, refining, storing, distributing, processing, refining, storing,
distributing, marketing, and selling crude oil, gasoline, kerosene, gas and
other refined petroleum products + power to fix market prices.
 1973 Philippine National Oil Corporation (PNOC) created by Marcos to
engage in the business of refining, marketing, shipping, transporting, and
storing petroleum. PNOC acquired ESSO and Filoil as its marketing arm,
Bataan Refining as the refinery. PNOC put up its marketing subsidiary
Petrophil and operated under the business name Petron Corporation. For
the first time, there was a Filipino presence in the Philippine oil market.
 1984 – Oil Price Stabilization Fund to cushion the effects frequent changes
in the price of oil. Reimburse oil companies for cost increases in crude oil
and imported products resulting from exchange rate adjustment / increase
in world market prices of crude oil and reimburse oil companies for cost
underrecovery incurred as a result of the reduction of domestic prices of
oil products.
 1983 – only 3 oil companies were operating in the country – Caltex, Shell,
PNOC.
 1987 – ERC regulates the business of importing, exporting , reexporting,
shipping, transporting, processing, refining, marketing and distributing
energy sources when warranted and only when public necessity requires.
  1992 – created DOE, thrust was toward privatization of government
agencies related to energy, deregulation of the power and energy industry
and reduction of dependency on oil-fried plants. Sec 5 of RA 7638: DOE,
upon approval of the P, institute programs and a timetable of deregulation
of appropriate energy projects and activities of the energy industry.
 1993 privatization of Petron, 40% sold to Aramco Overseas.
 1996 Congress enacted RA 8180, deregulating the downstream oil
industry. Any person or entity may import or purchase any quantity of
crude oil and petroleum products from a foreign or domestic source, lease
or own and operate refineries and other downstream oil facilities and
market such crude oil or use the same for his own requirement, subject
only to monitoring by DOE.
 Two phases of deregulation – transition and full deregulation.
 Transition – controls of the non-pricing aspects of the oil industry were to
be lifted (importation, exportation, manufacturing, marketing and
distribution; implementation of an automatic pricing mechanism;
implementation of an automatic formula to set margins of dealers and
rates of haulers, water transport operators and pipeline concessionaries;
restructuring of oil taxes)
 Full Deregulation: Controls on the price of oil and foreign exchange cover
lifted and OPSF abolished.
 1997 President implemented the full deregulation of the DOI through EO
No. 372.

Grounds for assailing constitutionality:

Petition 1
 Sec 5(b) – imposition of different tariff rates on imported crude oil (3%)
and imported refined petroleum products (7%) violate EPC.
 Does not deregulate the DOI but controls it.
 Tariff differential prevents the entry of other players in the oil industry
because it effectively protects the interest of oil companies with existing
refineries. Runs counter to the objective of the law – to foster a truly
competitive market.
 Violates Sec 26(1), Art VI – law must only embrace one subject

Petition 2
 Sec 15 (as to implementation of FD) – not later than March 1997 when
the prices of crude oil and petroleum products in the world market are
declining and when the exchange rate of the peso to the dollar is stable.
 Undue delegation of LP
 Arbitrary because – due to depletion of OPSF
 Allows the formation of a de facto cartel among 3 existing oil companies.

Defense: Not justiciable, questions wisdom of the law, no locus standi.

Issues:
1. WON justiciable – yes, courts have the power to determine WON there
has been GADALEJ
2. WON petitioners have locus standi – transcendental importance
3. WON Sec5(b) violates the one-title-one-subject requirement – no,
germane to the purpose of the law. Supposed to sway prospective
investors to put up refineries in our country and make them rely less on
imported petroleum.
4. WON it violates EPC
5. WON undue delegation of power - No
6. WON arbitrary - yes
7. WON violates the constitutional prohibition against monopolies,
combinations in restraint of trade and unfair competition - yes

Monopoly – privilege or peculiar advantage vested in one or more persons or

companies, consisting in the exclusive right or power to carry on a particular
business or trade, manufacture a particular article, or control the sale or the
whole supply of a particular commodity; form of market structure in which one
or only a few firms dominate the total sales of a product or service. End.

Combination in restraint of trade – agreement or understanding between two or

more persons, in the form of contract, trust, pool, holding company, or other
form of association, for the purpose of unduly restricting competition,
monopolizing trade and commerce in a certain commodity, controlling its
production, distribution and price, or otherwise interfering with freedom of trade
without statutory authority. Means.

Art 186 RPC – penalizes monopolization and creation of combinations in restraint

of trade
Art 28 NCC – damages

Goals of national economy:

- more equitable distribution of wealth
- sustained increase in the amount of goods and services produced by the
nation for the benefit of the people
- expanding productivity as the key to raising the quality of life for all
- state protects Filipino enterprises against unfair competition and trade
practices

Art XII, Sec 19 is anti-trust in history and in spirit. It espouses competition.

Competition alone can release the creative forces of the market – competition
that is fighting yet is fair.
Prevents new entrants, burdens them – tariff differential + inventory
requirement

Predatory pricing will be profitable only if the market contains significant barriers
to new entry.

Provisions on tariff differential, inventory and predatory pricing inhibit fair

competition, encourage monopolistic power and interfere with the free
interaction of market forces.

Striking down RA 8180 may cost losses in quantifiable terms to the oil
oligopolists. But the loss in tolerating the tampering of our Constitution is not
quantifiable in pesos and centavos. More worthy of protection than the supra-
normal profits of private corporations is the sanctity of the fundamental
principles of the Constitution.

American Needle, Inc. v. National Football League

560 US 183 (2010)
- Suit in Illinois federal district court against NFL and Reebok alleging that
the teams’ exclusive licensing agreement with Reebok violated the
Sherman Anti-Trust Act.
- Collective agreement to authorize NFL Properties to award the exclusive
headwear license to Reebok, was in fact a conspiracy to restrict other
vendors’ ability to obtain licenses for the teams’ IP. District court
dismissed. CA Affirmed.

WON Single entity – No

WON violates S1 – Yes

- Concerted action, which is not categorically beyond S1. Substantial,

independently owned and independently managed business whose objectives are
not common.

Demosthenes Agan v Philippine International Air Terminals Co, Inc.

GR No. 155001, 5 May 2003
Prohibition
Justice Puno

Facts:
- Rule 65 Petition seeking to prohibit the Manila International Airport
Authority and DOTC from implementing Concession Agreement, and
Amended and Restated Concession Agreement. Philippine International Air
Terminals Co, Inc. (Paircargo Consortium incorporated into the PIATCO)
 - AEDC v Paircargo
- RTC for Declaration of Nully of the Proceedings, Mandamus, Injunction
against the Sec of DOTC, the Chairman of the PBAC, voting members of
the PBAC and Pantaleon Alvarez as chairman of PBAC Tech Committee.

WON concession agreement and ARCA are constitutional - Nope

- The purpose of pre-qualification in any public bidding is to determine, at

the earliest opportunity, the ability of the bidder to undertake the project
with the government agency examining and determining the ability of the
bidder to fund the entire cost for the project by considering the maximum
amounts that each bidder may invest in the project at the time of the pre-
qualification (30% of the project cost)
- Pre-qualification, Bid and Awards Committee should not be allowed to
speculate on the future financial ability of the bidder to undertake the
project on the basis of the documents submitted.
- Bids should be evaluated based on the required documents submitted
before and not after the opening of the bids.
- Considering that at the pre-qualification stage, the max amounts which
the Paircargo Consortium may invest in the project fell short of the
minimum amounts prescribed by the PBAC, the SC held that the Paicargo
was not a qualified bidder.
- By its very nature, public bidding aims to protect the public interest by
giving the public the best possible advantages through open competition.
- In the field of govt. contract law, competition requires, not only bidding
upon a common standard, a common basis, upon the same thing, same
subject matter, the same undertaking, but also that it be legitimate, fair
and honest and not designed to injure or defraud the govt.
- Essential element: all must be in equal footing - not simply in terms of
application of the procedural rules and regulations imposed by the
relevant government agency, but more importantly, on the contract
bidded upon – if the winning bidder is allowed to later include or modify
certain provisions in the contract awarded such that the contract is altered
in any material respect, then the essence of fair competition in the public
bidding is destroyed.
- 1997 Concession Agreement gives PIATCO more favorable terms than
what was available to other bidders at the time the contract was bidded
out. (reduction in the types of fees that are subject to MIAA regulation
and the relaxation of such regulation with respect to other fees are
significant amendments) Originally, only Public Utility Revenues were
subject to MIAA regulation. (Two amendments: fees subject to MIAA
regulation and assumption of the government of liabilities of PIATCO)
- Section 4.04 grants PIATCO a financial advantage or benefit which was
not previously made available during the bidding process – security for
loans obtained.
- Three principles in public bidding – offer to the public, opportunity for
competition, basis for the exact comparison of bids
- If the government would in the end still be at the risk of paying the debts
incurred by the private entity in the BOT project, then the purpose of the
law is subverted.
- Those that cannot be done directly cannot be done indirectly.
- PU, temporary takeover – compensation because no transfer of
ownership.
- Monopoly - privilege or peculiar advantage vested in one or more persons
or companies, consisting in the exclusive right or power to carry on a
particular business or trade, manufacture a particular article or control the
sale of a particular commodity. Not per se prohibited by the Consti but
may be permitted to exist to aid the government in carrying on an
enterprise or to aid in the performance of various services and functions in
the interest of the public.
- The operation of an international passenger airport terminal is no doubt
an undertaking imbued w public interest. While it is the declared policy of
the BOT Law to encourage private sector participation by providing a
climate of minimum govt. regulation, the same does not mean that govt.
must completely surrender its sovereign power to protect PI in the
operation of a PU as a monopoly – the right granted to the PU may be
exclusive but the exercise of the right cannot run riot.