TABLE OF CONTENTS

1.0 WHAT ACTS ARE PROHIBITED UNDER 4

THE PHILIPPINE COMPETITION ACT?
Anti-competitive agreements 5
Hypothetical cases of anti-competitive agreements 6
Abuse of dominance 8
Hypothetical cases of abuses of dominance 10
Anti-competitive mergers and acquisitions 11
Hypothetical cases of anti-competitive mergers and acquisitions 11

2.0 what are the risks of breaching 13
the philippine competition act?
Risks of administrative fines 14
Risks of criminal penalties 15

3.0 what can i do? 16

File a complaint to the PCC 17
WHAT ACTS ARE
PROHIBITED UNDER
THE PHILIPPINE
COMPETITION ACT?

01
 KEY PROHIBITIONS UNDER THE PCA EXPLAINED

Anti-competitive agreements
In general terms, anti-competitive agreements are arrangements that substantially prevent, restrict, or
lessen competition. Some anti-competitive agreements may be classified into “horizontal” and “vertical”
agreements.

• Horizontal agreements are those entered into by and between two (2) or more competitors. For
example, two (2) competing manufacturers could collude and agree to sell the same product at the
same price.

• Vertical agreements are those entered into by and between two (2) or more entities at
different levels of the distribution or production chain such as those entered into by suppliers,
manufacturers, distributors, and retailers. Examples include distribution, agency, and franchising
agreements.

The Philippine Competition Act (PCA) prohibits three (3) types of anti-competitive conduct,
namely:

• Anti-competitive agreements between competitors or among enterprises in a production or

distribution chain that substantially prevent, restrict, or lessen competition.

• Abuse of market dominance, which occurs when a conduct of a business or company

with significant control or share in the market substantially prevents, restricts, or lessens
competition.

• Anti-competitive mergers and acquisitions, which refer to the coming together of two (2)
or more firms, or the purchase of one firm by another firm, respectively, that substantially
impedes competition in the market.

Examples of anti-competitive agreements:

Price fixing Bid rigging Output limitation Market sharing

Competitors collude Contractors or Firms or businesses Producers restrict

with one another to fix businesses, who agree to limit output the sale of goods and
the prices of goods participate in a or control production services to certain
and services, rather competitive bidding by fixing production geographic areas,
than allow the prices process, coordinate levels or setting quotas. thereby developing
to be determined by their price quotations Also, they may agree local monopolies.
market forces. rather than submit to deal with structural
independent bid prices. overcapacity or to
coordinate future
investment plans.

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 P h i l i pp i n e C o m p e t i t i o n A c t

Hypothetical cases of
anti-competitive agreements

Price fixing

“My flower shop is a member of a florists association. Our

association’s members voted unanimously to raise prices by
10%. The agreement is to implement this price increase as soon
as possible.”

The law prohibits anti-competitive agreements,1 including those that restrict

competition as to price, and those that fix prices at an auction or bidding
process. Under Section 4 of the PCA, an agreement may be a contract,
arrangement, understanding, collective recommendation, or concerted action.

A decision by your industry association to raise prices by a fixed percentage is a

collective recommendation or concerted action, which restricts competition as
to price. It is a form of price fixing. You must independently make all decisions
regarding the selling price of your goods.

Bid rigging

“My competitors and I own computer shops. In bidding for

contracts to supply computers to companies and government
agencies, we share information on our bids and sometimes agree
to take turns in securing contracts.”

The PCA prohibits fixing the price at an auction or manipulating bids. This includes
rotating bids,2 which is what you and your competitors appear to be doing.

1
Section 14 (a).
2
Section 14 (a).

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 KEY PROHIBITIONS UNDER THE PCA EXPLAINED

The following are some examples of bid manipulation:

1. Cover bidding. The act of submitting an artificially high price for a contract with the
assumption that the bid will not be accepted;

2. Bid suppression. An agreement made by businesses to not submit a bid so that another
would win the contract;

3. Bid rotation. The practice of competitors agreeing to take turns at winning contracts; and

4. Market allocation. Agreements in which competitors allocate specific types of customers,

products, or territories among themselves, such that one would not bid on contracts in
markets assigned to the other competitors.

Market sharing

“I am not making enough profit selling my dried organic mango

to retailers in both Manila and Cebu. I plan to stop selling in Manila
and ask my competitor to stop selling in Cebu. This way, we can
both sell more goods in our respective territories.”

Section 14 (b) (2) of the law prohibits agreements between or among

competitors wherein the market is divided or shared, such as by volume of sales
or purchases, territory, type of goods or services, buyers, or sellers. In this case,
your plan is to share the market by territory. If, upon review, such agreement is
deemed to substantially prevent, restrict, or lessen competition, then it shall be
considered a violation of the PCA.

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 P h i l i pp i n e C o m p e t i t i o n A c t

Abuse of dominance
In competition law, dominant position refers to a position of economic strength. Markets that are
dominated by a small number of large companies are vulnerable to anti-competitive practices. In the
conduct of their business, dominant companies, considering their size, scope, and position of economic
strength, may have a disproportionately severe effect on the market and its competitors. However, the
law’s provisions on abuse of dominance are not meant to punish companies for their success. The PCA does
not mean to unfairly burden dominant companies. Rather, the law is concerned with and punishes abuse of
dominant position.

Under the PCA, it is illegal to abuse one’s dominant position. This is because it harms competitors through
means such as:

Exploitative behavior toward consumers,

customers, and competitors

Excessive or unfair purchase or sales prices of goods and services, or

other unfair trading conditions such as tying the sales of unrelated
products. The following are examples of exploitative behavior:

A. 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.

B. Tying / Bundling. Making transactions subject to the acceptance of

other parties through other obligations that have no connection with
the transaction, or making the supply of particular goods or services
dependent upon the purchase of other goods or services that have no
direct connection with the main goods or services being supplied.

C. Imposing restrictions on the lease or contract of sale or trade of goods

or services concerning where, to whom, or in what form goods or services
may be sold or traded. These restrictions include fixing prices, giving
preferential discounts or rebates upon such price, or imposing conditions
not to deal with competing entities. It is not necessarily unlawful to enter
into:

i. Permissible franchising, licensing, exclusive merchandising, or exclusive

distributorship agreements such as those which give each party the
right to unilaterally terminate the agreement; or

ii. Agreements protecting intellectual property rights, confidential

information, or trade secrets.

D. Monopsony. Directly or indirectly imposing unfairly low purchase prices

for the goods or services of, among others, marginalized agricultural
producers, fisherfolk, MSMEs (micro, small, and medium enterprises), and
other marginalized service providers and producers.

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KEY PROHIBITIONS UNDER THE PCA EXPLAINED

Predatory pricing

A dominant player in a market deliberately incurs losses in the short term

by setting prices so low that it forces other competitors out of the relevant
market, so as to be able to charge higher prices in the long term.

Discriminatory behavior

A dominant player deliberately applies dissimilar pricing or conditions to

otherwise equivalent transactions.

Limiting production, markets, or technical

development to the prejudice of consumers

This includes output restrictions or the illegitimate refusal of a dominant

player to supply certain goods or services. This can also include restrictions
in the access, use, and development of a new technology.

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 P h i l i pp i n e C o m p e t i t i o n A c t

Hypothetical cases of abuses of dominance

Imposing restrictions

“My supplier of dietary supplements, the biggest manufacturer

in the industry, appointed distributors throughout the Philippines
to sell its products. I’d like to sell to my Facebook friends, many
of whom live outside my province. However, the company told
me that, while I can advertise online, I’m only allowed to sell to
residents of my province.”

While Section 15 of the law prohibits the abuse of a dominant position by, for
example, imposing restrictions on the contract of sale or trade of goods concerning
where, to whom, or in what form goods or services may be sold or traded where
the object or effect of the restrictions is to substantially prevent, restrict, or lessen
competition, it provides for exceptions such as: permissible franchising, licensing,
exclusive merchandising, or exclusive distributorship agreements. The PCC needs
to determine the validity of exclusivity restrictions in relevant markets on a
case-by-case basis.

Monopsony
“Our small farming village supplies ube to the only restaurant
chain that serves ube pancakes throughout the country. The
restaurant chain buys almost all the ube grown and harvested
in the country. The company forces all ube farmers to sell our
products at an extremely low purchase price for them. Our
farming families have no choice but to accept the price set by
the restaurant chain because there is no other significant buyer
of ube and our produce will spoil if we are unable to sell them
immediately. As a result, many of the families in our farming
village barely make an income.”

The restaurant chain may be in violation of the PCA. Section 15 (g) of the law
prohibits the abuse of a dominant position by directly or indirectly imposing
unfairly low purchase prices for the goods or services of, among others,
marginalized agricultural producers, fisherfolk, MSMEs (micro, small, and medium
enterprises), and other marginalized service providers and producers.

Tying / Bundling
“I have a company that leases out trucks, and I rely on a supplier
that is the only one able to provide tires for trucks. However, the
supplier said that they will only continue to sell to my company if
I also buy a minimum number of smaller tires for cars, which I do
not need.”

Section 15 (f) of the law prohibits the abuse of a dominant position where the
supply of goods or services is made dependent upon the purchase of other
goods or services that have no direct connection with the main goods or
services to be supplied. Your supplier is prohibited from requiring you to buy
another product since it is in a dominant position, as defined in Section 4 (g).

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 KEY PROHIBITIONS UNDER THE PCA EXPLAINED

Anti-competitive mergers and acquisitions

A merger is defined as the joining of two (2) or more entities into an existing entity or to form a new entity,
including joint ventures; while an acquisition refers to the purchase or transfer of securities or assets for
the purpose of obtaining control by one (1) or more firms over the whole or part of another firm or firms.

Mergers and acquisitions (M&As) can be good for consumers because they can enable businesses to operate
more efficiently, and bring the prices of their products down. M&As can result in economies of scale and
scope, enable transfer of technologies, broaden access to capital, and increase productivity. However, there
are M&As that harm competition and result in a market that is disadvantageous to consumers.

Hypothetical cases of anti-competitive

mergers and acquisitions

“Faster Hauling Services Corporation proposed to merge with Fast

Freight Forwarding Corporation solely to improve their economic
strength by accumulating a combined share of 80% in the hauling
market. Upon review of their financial data, none of the parties
involved in the transaction were found to be facing financial
failure. Furthermore, based on economic analyses, there appeared
to be no efficiency gains resulting from the transaction.”

Section 20 of the PCA prohibits merger and acquisitions that substantially

lessen competition in the relevant market for goods. In the example provided,
the parties involved are already the largest producers of handmade shoes in the
country. The review of the transaction should take into account the fact that
the resulting entity from the acquisition will control a dominant market share
(85%). This might lead to higher prices, fewer choices, and less innovation, to
the detriment of consumers.

“AAA Shoe Company wanted to acquire its competitor, XYZ Shoe

Company. They are two of the largest producers of handmade
shoes in the Philippines, accounting for 50% and 35% market
share, respectively.”

Section 20 of the PCA prohibits merger acquisitions that substantially lessen

competition in the relevant market for goods. In the example provided, the parties
involved are already the largest producers of handmade shoes in the country.
The review of the transaction should take into account the fact that the resuIting
entity from the acquisition will monopolize the local market for handmade shoes
by virtue of its dominant market share (85%). This might lead to higher prices,
fewer choices, and less innovation, to the detriment of consumers.

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 P h i l i pp i n e C o m p e t i t i o n A c t

The proposed acquisition of Telefónica UK’s ‘O2’ by Hutchison 3G UK’s ‘Three’ was blocked by the
European Commission. Upon their investigation, they found that the acquisition will: (i) lead to
higher prices and reduced choice and quality for consumers in the UK mobile market; (ii) hamper the
development of the entire UK mobile network infrastructure; and (iii) reduce the number of network
operators willing to host virtual operators.

Source: European Commission. (October 30, 2015). Mergers: Commission prohibits Hutchison’s proposed acquisition of Telefónica
UK. Retrieved May 5, 2017, from: http://europa.eu/rapid/press-release_IP-16-1704_en.htm

Compulsory Notification
The PCA and its IRR oblige parties to the M&A agreement, where the PHP1 billion notification threshold
is breached, to notify the PCC before proceeding with the merger or acquisition. The said parties are not
allowed to consummate their agreement without the approval of the PCC.

If parties to M&A transactions requiring compulsory notification fail to notify the PCC, the said transactions
shall be considered void. Furthermore, parties will be sanctioned with an administrative fine ranging
between 1% and 5% of the transaction value.

Motu Proprio review

Even if an M&A transaction does not exceed the notification threshold, the PCC has the authority to review
or investigate, on its own initiative, any transaction that may result in the substantial lessening or restriction
of competition in a market.

If, upon review of mergers and acquisitions, the PCC finds that a proposed transaction is likely to harm
competition in a market, it has the power to disallow the merger or acquisition. It may also allow the
transaction, subject to arrangements that will remedy or mitigate the potential harm to competition arising
from the transaction.

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 KEY PROHIBITIONS UNDER THE PCA EXPLAINED

WHAT ARE THE

RISKS OF BREACHING
THE PHILIPPINE
COMPETITION ACT?

02 13
 P h i l i pp i n e C o m p e t i t i o n A c t

Sections 29 and 30 of the PCA detail the fines and penalties for violators of the antitrust law.

Risks of administrative fines

Conduct of anti-competitive behavior

Parties found to have committed anti-competitive agreements and abuses of dominance, or those
that failed to comply with compulsory mergers and acquisitions procedures, will be sanctioned
with administrative fines. The PCC will consider both the gravity and the duration of the violation
in defining the appropriate amount of fines.

• First offense: Fine of up to PHP100 million

• Second offense: Fine of not less than PHP100 million but not more than PHP250
million

Note that the fines shall be increased by the Commission every five (5) years to maintain their real
value from the time it was set.

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 KEY PROHIBITIONS UNDER THE PCA EXPLAINED

Risks of criminal penalties

For violations of Sections 14 (a) and 14 (b), the following penalties may be imposed:

• Imprisonment from two (2) to seven (7) years, and

• Fine of not less than PHP50 million but not more than PHP250 million

Imprisonment will be sanctioned for responsible officers and directors of violators. When
juridical persons (e.g., corporations, business associations) are involved, imprisonment will
be imposed on its officers, directors, or employees holding managerial positions, who are
knowingly and willfully responsible for the violation.

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 P h i l i pp i n e C o m p e t i t i o n A c t

WHAT CAN
I DO?

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03
 KEY PROHIBITIONS UNDER THE PCA EXPLAINED

File a complaint to THE PCC

If you suspect that any business, company, or organization is behaving anti-competitively, and that such
behavior may constitute a possible violation of the PCA, kindly file a complaint with the PCC.

The PCC will evaluate the complaints (i.e., verified complaints) and determine if there is a reasonable basis
to commence an investigation.

complaints on cartels

The PCC is interested in hearing useful information on cartels in the Philippines. If you are aware of cartel
arrangements, you are highly encouraged to contact the PCC through the following:

PHILIPPINE COMPETITION COMMISSION

Postal Address: 2nd Floor, DAP Building,
San Miguel Avenue, Ortigas Center, Pasig City
Telefax: +632 631 2129
Email Address: ceo@phcc.gov.ph | queries@phcc.gov.ph

Examples of relevant information include:

• Information about the conspiring companies or businesses;

• The nature of the cartelized industry; and
• Any other relevant information backed with supporting documents as proof of the agreements,
decisions, or practices of the cartel (i.e., records of a tender and all communication with those that
submitted tenders).

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 P h i l i pp i n e C o m p e t i t i o n A c t

Contact Us

The Philippine Competition Commission is

open Mondays through Fridays, from 9:00 a.m.
to 5:00 p.m. Submissions of notifications and
complaints are accepted during these hours.

 2nd Floor, DAP Building,

San Miguel Avenue, Ortigas Center,
Pasig City, Philippines

 www.phcc.gov.ph

 +632 515 4536

 queries@phcc.gov.ph

 ceo@phcc.gov.ph

 mergers@phcc.gov.ph

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