Philippine Competition Act - anti-competitive policies

Policy and constitutional intent

The State recognizes that market competition is a mechanism for allocating goods and services efficiently.
The State recognizes the need to reinforce past liberalization measures with safeguards that protect competitive conditions.
The State recognizes that equal opportunities promote entrepreneurial spirit, encourage private investment, facilitate technology development and transfer, and enhance resource productivity.
The State commits to economic efficiency and free and fair competition in trade, industry, and all commercial economic activities through a national competition policy implemented by the Government and its political agencies.
The State commits to prevent economic concentration that controls production, distribution, trade, or industry in a manner that unduly stifles competition and constricts the discipline of free markets.
The State commits to penalize anti-competitive agreements, abuse of dominant position, and anti-competitive mergers and acquisitions to protect consumer welfare and advance domestic and international trade and economic development.

Coverage, reach, and labor carve-out

The Act applies to any person or entity engaged in trade, industry, and commerce in the Republic of the Philippines.
The Act applies to international trade when it has direct, substantial, and reasonably foreseeable effects on trade, industry, or commerce in the Philippines, including acts done outside the Philippines.
The Act does not apply to combinations or activities of workers or employees and to agreements or arrangements with employers when designed solely to facilitate collective bargaining regarding conditions of employment.

Core definitions for enforcement

“Acquisition” means purchase of securities or assets through contract or other means for the purpose of obtaining control, including acquisitions by (1) one entity of the whole or part of another, (2) two or more entities over another, or (3) one or more entities over one or more entities.
“Agreement” includes any contract, arrangement, understanding, collective recommendation, or concerted action—formal or informal, explicit or tacit, written or oral.
“Conduct” includes any undertaking, collective recommendation, independent or concerted action or practice—formal or informal.
“Commission” means the Philippine Competition Commission created under the Act.
“Confidential business information” covers information concerning or relating to operations, production, sales, shipments, purchases, transfers, identification of customers, inventories, or the amount or source of income, profits, losses, or expenditures.
“Control” means ability to substantially influence or direct an entity’s actions or decisions by contract, agency, or otherwise.
“Dominant position” means a position of economic strength enabling control of the relevant market independently of competitors, customers, suppliers, or consumers, singly or in combination.
“Entity” includes any person, natural or juridical, including sole proprietorships, partnerships, combinations, or associations in any form (whether incorporated or not, domestic or foreign), including those owned or controlled by the government.
“Market” means the group of sufficiently interchangeable or substitutable goods or services and the geographic area where they are offered.
“Merger” means joining two or more entities into an existing entity or forming a new entity.
“Relevant market” is the market where a particular good or service is sold, defined as the relevant product market plus relevant geographic market:
- Relevant product market includes goods/services regarded as interchangeable or substitutable by consumers or customers because of characteristics, prices, and intended use.
- Relevant geographic market is the area where the entity is involved in supply and demand, with sufficiently homogenous conditions of competition and separable from neighboring areas due to different conditions.

Philippine Competition Commission structure and powers

The Philippine Competition Commission (PCC) is created as an independent quasi-judicial body, organized within sixty (60) days from effectivity.
The PCC is an attached agency to the Office of the President.
The PCC consists of a Chairperson and four (4) Commissioners.
Commissioners must be citizens and residents of the Philippines, of good moral character, with recognized probity and independence, and must have distinguished themselves professionally in economics, law, finance, commerce or engineering.
The Chairperson and Commissioners must have at least ten (10) years in active practice of their professions and must not have been candidates for any elective national or local office in the immediately preceding elections.
At least one (1) Commissioner must be a member of the Philippine Bar with at least ten (10) years in active practice of law, and at least one (1) must be an economist.
The Chairperson and Commissioners equivalent to cabinet secretary and undersecretary, respectively, are appointed by the President.

Terms, disqualifications, staff, quorum

The Chairperson and Commissioners have a seven (7) year term without reappointment.
For the first set of appointees: the Chairperson serves seven (7) years; among the first four (4) Commissioners, two (2) serve seven (7) years and two (2) serve five (5) years.
Any vacancy appointment is for the unexpired term of the predecessor.
Commissioners have security of tenure and cannot be suspended or removed except for just cause as provided by law.
Commissioners cannot hold any other office or employment during their tenure.
Commissioners cannot directly or indirectly practice any profession except teaching, cannot participate in any business, and cannot be financially interested in contracts or franchises or special privileges granted by government (including GOCCs and subsidiaries).
Commissioners must avoid conflicts of interest and cannot run for election in the immediately succeeding elections after cessation from office, except that the prohibition does not apply to Barangay or Sangguniang Kabataan elections.
Commissioners are barred from personally appearing or practicing as counsel or agent on matters pending before the Commission for two (2) years after cessation.
The spouse or relatives within the fourth civil degree of the Commissioners, the Chairperson, and the Executive Director may not appear as counsel or agent on pending matters or transact business with the Commission during incumbency and within two (2) years from cessation.
The Commission members’ compensation and emoluments are exempt from Republic Act No. 6758 (Salary Standardization Act); salaries and emoluments are set under an objective classification system and submitted to the President for approval.
Quorum is three (3) members, and three (3) affirmative votes are required to adopt rules, rulings, orders, resolutions, decisions, or other acts of the Commission.
The Commission appoints adequate staff, including an Executive Director.
The Executive Director must have relevant experience in relevant fields for at least ten (10) years.
Technical staff (except those performing purely clerical functions) must possess at least a Bachelor’s Degree in economics, law, finance, commerce, engineering, accounting, or management.

Prohibited conduct under competition law

The Commission has original and primary jurisdiction to enforce and implement the Act and its implementing rules and regulations.
The Commission enforces violations through inquiry, investigation, hearing, and deciding on cases involving violations of the Act and other competition laws motu proprio, upon a verified complaint, or upon referral by a regulatory agency, and may institute appropriate civil or criminal proceedings.
Anti-Competitive Agreements are prohibited:
- Agreements among competitors that are per se prohibited include:
  - Restricting competition as to price, its components, or other terms of 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 bid-manipulation practices.
- Agreements among competitors that have the object or effect of substantially preventing, restricting, or lessening competition are prohibited, including:
  - Setting, limiting, or controlling production, markets, technical development, or investment.
  - Dividing or sharing the market by volume of sales or purchases, territory, type of goods or services, buyers or sellers, or any other means.
- Other agreements with the object or effect of substantially preventing, restricting, or lessening competition are prohibited, except that those that contribute to improving production or distribution or promoting technical or economic progress, while allowing consumers a fair share of the resulting benefits, may not be deemed a violation.
- Entities that control, are controlled by, or are under common control with another entity or entities, and have common economic interests and cannot act independently, are not considered competitors for purposes of this section.
Abuse of Dominant Position is prohibited:
- It is prohibited for one or more entities with dominance to abuse it by engaging in conduct that would substantially prevent, restrict, or lessen competition, including:
  - Selling below cost to drive competition out of the relevant market, subject to the Commission’s evaluation that considers whether the entity had no such object and the price was in good faith to meet a competitor’s lower price of the same or comparable product/service of like quality.
  - Imposing barriers to entry or committing acts that prevent competitors from growing in an anti-competitive manner, except barriers arising from a superior product/process, business acumen, or legal rights or laws.
  - Making transactions subject to acceptance by other parties of obligations with no connection to the transaction.
  - Unreasonably discriminating in setting prices or other terms/conditions between customers or sellers trading on similar terms/conditions, where the effect may lessen competition substantially, with permissible differentials including:
    - Socialized pricing for the less fortunate sector of the economy.
    - Differentials reasonably reflecting differences in cost of manufacture, sale, or delivery due to different methods, technical conditions, or quantities.
    - Differentials or terms in response to a competitor’s competitive prices, payments, services, or facility changes.
    - Price changes responding to changing market conditions, marketability, or volume.
  - Restricting lease or contract for sale/trade regarding where, to whom, or in what forms goods/services may be sold/traded in a way that prevents/restricts/lessens competition substantially, while allowing permissible franchising/licensing/exclusive merchandising/exclusive distributorship agreements with unilateral termination rights and agreements protecting intellectual property rights, confidential information, or trade secrets.
  - Making supply of certain goods/services dependent on purchase of unrelated goods/services from the supplier.
  - Imposing unfairly low purchase prices for goods/services of marginalized agricultural producers, fisherfolk, micro-small, medium-scale enterprises, and other marginalized service providers and producers.
  - Imposing unfair purchase or selling prices on competitors, customers, suppliers, or consumers, while excluding from “unfair prices” those resulting from superior product/process, business acumen, or legal rights or laws.
  - Limiting production, markets, or technical development to the prejudice of consumers, while excluding limitations resulting from superior product/process, business acumen, or legal rights or laws.
- The Act does not prohibit or render unlawful having a dominant position itself, nor acquiring, maintaining, or increasing market share through legitimate means that do not substantially prevent, restrict, or lessen competition.
- Conduct that improves production or distribution and promotes technical and economic progress while giving consumers a fair share of resulting benefits may not necessarily be considered an abuse.
- The Commission and relevant regulator may pursue measures to promote fair competition or more competition under the Act.

Merger and acquisition control system

The Commission reviews mergers and acquisitions based on factors it deems relevant.
Compulsory notification is required when the value of the transaction exceeds PHP 1,000,000,000.00.
Parties to a merger or acquisition agreement exceeding PHP 1,000,000,000.00 are prohibited from consummating until thirty (30) days after providing notification in the form and information required by Commission regulations.
The Commission promulgates additional sector-specific or cross-sector criteria, including possible thresholds based on increased market share.
A merger/acquisition consummated in violation of the notification requirement is considered void and subjects the parties to an administrative fine of one percent (1%) to five percent (5%) of the value of the transaction.
The Commission may request further information directly relevant to the prohibition under Section 20 before the end of the initial thirty (30) day waiting period.
A further-information request extends the no-consummation period by an additional sixty (60) days beginning the day after receipt by the parties.
In all cases, total review time for the subject agreement shall not exceed ninety (90) days from initial notification.
If the periods expire without a decision for any reason, the merger or acquisition is deemed approved and the parties may proceed to implement or consummate it.
Information provided to or emanating from the Commission under this chapter is subject to confidentiality rules under Section 34, except with notifying entity consent or mandatory disclosure by law or valid court/regulatory order (including an exchange).
For mergers/acquisitions involving banks, banking institutions, building and loan associations, trust companies, insurance companies, public utilities, educational institutions, and other special corporations governed by special laws, a favorable or no-objection ruling by the Commission does not dispense with the requirement for a favorable recommendation by the appropriate government agency under Section 79 of the Corporation Code of the Philippines.
A favorable recommendation from a governmental agency with a competition mandate creates a disputable presumption that the proposed merger/acquisition is not violative of the Act.

Merger outcomes, notification thresholds, exemptions

If within the relevant periods, the Commission determines that the agreement is prohibited under Section 20 and does not qualify for exemption under Section 21, the Commission may:
- Prohibit implementation; or
- Prohibit implementation unless modified in changes specified by the Commission; or
- Prohibit implementation unless legally enforceable agreements specified by the Commission are entered into.
The Commission adopts and publishes regulations on:
- Transaction value threshold and criteria triggering notification.
- Information required for notified merger or acquisition.
- Exceptions or exemptions from the notification requirement.
- Rules on notification procedures.
Prohibited mergers and acquisitions are those whose agreements substantially prevent, restrict, or lessen competition in the relevant market (or the market for goods or services as determined by the Commission).
Exemptions are available for prohibited agreements when the parties establish either:
- Efficiencies gains that are greater than the effects of any limitation on competition resulting or likely to result; or
- Actual or imminent financial failure, where the agreement represents the least anti-competitive arrangement among known alternative uses for the failing entity’s assets.
An acquisition of stock or other share capital prior to approval of the Act, and an acquiring entity’s continuing ownership/holding of stock/assets of another corporation, are not prohibited.
Acquiring stock or share capital solely for investment, without voting or exercising control and without bringing about or attempting to prevent/restrict/lessen competition is not prohibited.
The burden of proof for exemption under Section 21 lies with the parties seeking exemption.
For exemption under Section 21(a), the party must demonstrate that, absent implementation, significant efficiency gains would not be realized.
Merger or acquisition agreements receiving a favorable Commission ruling cannot be challenged under the Act except when the ruling was obtained through fraud or false material information.

Disposition of cases: markets and assessments

In defining the relevant market, the Commission considers factors affecting substitutability and geographic boundaries, including:
- Substitution possibilities considering technological possibilities, extent of substitutes available to consumers, and time required for substitution.
- Cost of distribution, raw materials, supplements and substitutes from other areas and abroad considering freight, insurance, import duties, and non-tariff restrictions; restrictions by economic agents/associations; and time to supply.
- Cost and probability of users/consumers seeking other markets.
- National, local, or international restrictions limiting access by users/consumers to alternate sources or access by suppliers to alternate consumers.
In determining control, the Commission presumes control when the parent owns more than one half (1/2) of voting power, unless exceptional circumstances clearly show it is not control.
Control exists even with one half (1/2) or less of voting power when any of the listed circumstances apply, including power to direct financial/operating policies, appoint/remove the majority of governing board, cast majority votes at board meetings, rights to use all/significant assets, or rights/contracts conferring decisive influence.
In determining whether anti-competitive agreement or conduct occurred, the Commission:
- Defines the relevant market using Section 24 principles.
- Determines actual or potential adverse impact on competition that is substantial and outweighs actual/potential efficiency gains.
- Uses a broad, forward-looking perspective, considering future developments, needs to make goods/services available, infrastructure investment requirements, legal requirements, and the economy’s need to respond to international competition; while also considering past behavior and prevailing market conditions.
- Balances ensuring competition is not prevented or substantially restricted against the risk of deterring competition efficiency/productivity/innovation/development of priority areas due to undue intervention.
- Assesses totality of evidence and whether it is more likely than not the entity engaged in anti-competitive agreement or conduct, considering reasonable commercial purpose (e.g., product phasing out or business closure) or reasonable commercial response to competitor entry or conduct.
In determining market dominant position, the Commission considers factors including market share and ability to fix prices or restrict supply, barriers to entry, competitors’ power, competitors’ access to inputs, customer switching power, recent conduct, and other regulatory criteria.
There is a rebuttable presumption of market dominance if market share is at least fifty percent (50%), unless the Commission sets a new sector-specific threshold.
The Commission publishes dominance thresholds considering market structure, integration, access to end-users, technology and financial resources, and other factors.
Legitimate means of acquiring/maintaining/increasing market share are not treated as violating the Act, including superior skills, superior service, quality products, business acumen, and protected intellectual property rights.
The Commission may grant forbearance from applying the Act for a limited time in whole or part (and for specific cases or entities) if enforcement is not necessary to attain policy objectives, forbearance does not impede competition in relevant/related markets, and forbearance is consistent with public interest and consumer welfare.
The Commission holds a public hearing for forbearance determinations.
Forbearance orders must be made public, and the Commission may attach conditions to protect the long-term interest of consumers.
If the basis for the forbearance order ceases, the Commission may withdraw the order.

Administrative and criminal penalties

The Commission may impose administrative fines after due notice and hearing for violations of:
- Chapter III (Sections 14 and 15) and Chapter IV (Sections 17 and 20).
Administrative fines schedule includes:
- First offense: up to PHP 100,000,000.00.
- Second offense: not less than PHP 100,000,000.00 but not more than PHP 250,000,000.00.
The Commission determines fine amounts by considering the gravity and duration of the violation.
Failure to comply with Commission rulings/orders/decisions results in a penalty of not less than PHP 50,000.00 up to PHP 2,000,000.00 for each violation, plus a similar penalty for each day thereafter until full compliance.
Such daily penalties accrue only beginning forty-five (45) days from receipt of the Commission decision/order/ruling.
Supplying incorrect or misleading information intentionally or negligently in any document/applications/papers filed with the Commission or in applications for binding rulings, consent judgments, show-cause proceedings, or modifications of Commission rulings/orders/approvals allows fines up to PHP 1,000,000.00.
Any other violations not specifically penalized are fined from PHP 50,000.00 to PHP 2,000,000.00.
The schedule of fines is increased by the Commission every five (5) years to maintain real value.
Criminal penalties apply to entities entering anti-competitive agreements covered under Chapter III, Sections 14(a) and 14(b):
- For each and every violation: imprisonment of two (2) to seven (7) years and a fine of not less than PHP 50,000,000.00 but not more than PHP 250,000,000.00.
- Imprisonment is imposed on responsible officers and directors.
- For juridical persons, imprisonment is imposed on officers/directors/employees holding managerial positions who are knowingly and willfully responsible.

Investigation, orders, confidentiality, leniency

The Commission has sole and exclusive authority to initiate and conduct fact-finding or preliminary inquiry for enforcement based on reasonable grounds, motu proprio, upon a verified complaint by an interested party, or upon referral by a regulatory agency.
The Commission terminates fact-finding/preliminary inquiry by:
- Closing if no violation/infringement is found; or
- Proceeding to a full administrative investigation based on reasonable grounds.
After due notice and hearing, the Commission may issue an order for temporary cessation/desistance from acts causing material and adverse effect on consumers or competition in the relevant market.
If evidence warrants, the Commission may file before the DOJ criminal complaints for violations, with DOJ preliminary investigation in accordance with the Revised Rules of Criminal Procedure.
Preliminary inquiry must be completed within ninety (90) days from submission of the verified complaint, referral, or initiation motu proprio.
No law enforcement agency may conduct fact-finding/inquiry/investigation into competition-related matters, except as provided in Section 12(i).
The Commission has original and primary jurisdiction over all competition-related issues, but when issues involve both competition and noncompetition issues, the sector regulator is consulted and afforded reasonable opportunity to submit its own opinion and recommendation before Commission decision.
The Commission and sector regulators work together to issue rules promoting competition and protecting consumers and preventing abuse of market power by dominant players in their respective sectors.
The Commission has investigative powers including administering oaths, issuing subpoena duces tecum and subpoena ad testificandum, summoning witnesses, and commissioning consultants/experts; it enforces orders and resolutions using provisional or other available means, including contempt and fines.

Confidential information rules

Confidential business information submitted for inquiries/investigations and deliberations is prohibited from being disclosed, published, transferred, copied, or disseminated directly or indirectly.
Confidentiality protection applies to notices, bulletins, rulings, and other documents to the extent possible.
Confidentiality does not apply if the notifying entity consents or if disclosure is mandatorily required by law or by a valid court/regulatory order (including an exchange).
The identity of persons providing information under anonymity remains confidential unless expressly waived.
Any violation of confidentiality is punished with a fine of not less than PHP 1,000,000.00 but not more than PHP 5,000,000.00.

Leniency program and related plea remedies

The Commission develops a Leniency Program for immunity from suit or reduction of fines for participants in prohibited anti-competitive agreements (covered by Section 14(a) and 14(b)) who voluntarily disclose information and satisfy specific criteria prior to or during fact-finding/preliminary inquiry.
Immunity from suit is granted if, at the time the entity comes forward:
- The Commission has not received information about the activity from any other source;
- The entity took prompt and effective action to terminate its participation upon discovery;
- The entity reports with candor and completeness and provides full, continuing, and complete cooperation; and
- The entity did not coerce another party and was not leader/originator.
Leniency remains available even after the Commission has received information once fact-finding/preliminary inquiry has commenced, provided conditions including:
- The entity is first to come forward and qualify;
- At the time of filing, the Commission does not have evidence likely to result in a sustainable conviction; and
- Granting leniency is not unfair to others.
The program includes immunity from suit or charges for affected parties and third parties, exemptions/waivers or gradation of fines/penalties, and gives precedence to the first qualifying entity.
Entities cooperating with the Commission in connection with investigations are not subjected to reprisal or discrimination; reprisal or discrimination constitutes a violation subject to Act sanctions.
False, misleading, or malicious information/ data/documents may still be prosecuted.
The DOJ-OFC may grant leniency or immunity as provided when a preliminary investigation is pending before it.
Nolo contendere may be entered by an entity charged in a criminal proceeding under Section 14(a) and 14(b).
The plea does not admit nor deny responsibility but accepts punishment as if guilty.
The plea cannot be used against the entity to prove civil liability arising from the criminal action or in another cause of action.
Nolo contendere may be entered only up to arraignment and thereafter only with court permission, which is granted only after weighing effects on parties, the public, and administration of justice.

Non-adversarial remedies and contempt

The Commission encourages voluntary compliance with the Act through non-adversarial administrative remedies before administrative, civil, or criminal actions, subject to implementing rules.
A binding ruling may be requested in writing by any entity in doubt about compliance, violation, exemption, or the legality of contemplated acts/conduct/agreements/decisions when no prior complaint or investigation has begun.
Binding rulings apply for a specified period subject to extension and must be based on substantial evidence.
An adverse binding ruling gives the applicant a reasonable period (no more than ninety (90) days) to abide; the applicant is not subject to administrative, civil, or criminal action unless it fails to comply.
A show cause order must be issued upon preliminary findings motu proprio or on written sworn complaint by an interested party, if issuance is in the public interest, requiring the entity to show cause within a fixed period why a cease and desist order, administrative fine, or business readjustment order should not issue.
A consent order may be proposed by any entity under inquiry at any time prior to conclusion of the inquiry without admitting any violation; it must specify terms including:
- Payment within the fine range under the Act;
- Compliance reports and the entity responsible for regular submissions;
- Payment of damages to private parties who suffered injury; and
- Other terms appropriate for effective enforcement.
A consent order does not bar inquiry for the same or similar acts if continued or repeated.
The Commission monitors compliance after a final executory binding ruling, cease and desist order, or consent judgment, and issues a certification/resolution upon motion of interested parties stating compliance or non-compliance.
Evidence inadmissibility: requests for binding rulings, show cause orders, consent proposals, facts/data/info therein and later supplied, admissions against interest, documents filed and evidence presented before the Commission, and resulting Commission judgments/orders are inadmissible in criminal proceedings arising from the same act against the entity and