The Philippines - Economic Growth - usaid

SOUTHEAST ASIA COMMERCIAL LAW & INSTITUTIONAL REFORM AND TRADE DIAGNOSTICS JULY 2007
THE PHILIPPINES
basic necessities and prime commodities and prescribes measures against abusive price increases during
emergencies and other critical situations through price controls and mandated price ceiling mechanisms.
Price increases by a dominant firm might conceivably be viewed as an abuse of its dominance, or an
increase in price by a cartel might be challengeable. There are no standards or criteria set out in the law
for assessing market conditions (particularly entry conditions), or competitive effects. If anything, the law
would seem to stand for the proposition that stable prices serve the public interest.
Philippine Corporation Code Batas Pambansa Bilang 68 (1980). This law provides for rules and
procedures to approve all combinations, mergers, and consolidations. The SEC reviews financial
statements and is responsible for detecting fraud or abuse. However, the law carries no mandate to
examine the potential competitive effects of proposed transactions. Instead, the SEC inquiry is into
whether the public interest is served by gains in efficiencies. As a practical matter, the Philippines has no
merger law as it is understood in the world competition community. Substantial mergers have taken place
without any determination of their effect on competition. (The SEC also has authority over insider trading
and manipulation of security prices (Batas Pambansa Blg 178, (1982)).
In addition to these five main laws, a number of laws regulate competition in various specific situations or
industry sectors, discussed below. In addition, there is a law directed to intellectual property and related
laws applicable to patents, trademarks, and copyrights (R.A. 8293 (1997)). There are regulations of banks
and banking. As befits an island trading nation, there are a host of regulations on imports, particularly as
they relate to alleged dumping of foreign goods (R.A. 8752, (1999)).
None of the main competition laws has reached the Philippine courts, but on at least two occasions, the
Supreme Court has dealt with competition issues. It has discussed at length its understanding of the
Constitutional proscriptions, including some discussion of the economic underpinnings of antitrust law.
These cases also show deference to and reliance on U.S. primary and secondary legal authorities for
analysis and conclusions in this field. In one case, 57 the Court dealt with a situation where a rival beer
manufacturer acquired enough stock in the San Miguel Beer company to obtain a seat on its board of
directors. San Miguel’s board produced by-laws that led to the ouster of the intruder, on the grounds that a
competitor's presence on the board compromised San Miguel’s ability to compete. The Philippine SEC
agreed and upheld the ouster of the director, who obtained review of this quasi-judicial administrative
decision before the Supreme Court. In U.S. terms, this was an interlocking directorate between competing
firms, unlawful under U.S. law unless the competitive product or service overlap is de minimus. The
Court caught the point of this law in noting, “A common director of two or more competing corporations
would have access to confidential sales, pricing, and marketing information and could be in a position to
coordinate policies or to aid one corporation at the expense of the other, thereby stifling competition.”
The Court concluded that a by-law barring a competitor from sitting on a board of directors was valid and
reasonable.
The second case was significant in that it ruled unconstitutional the law purporting to deregulate the
downstream market for petroleum distribution. It did so largely on competition policy grounds. The
decision justifies itself as pro-consumer, and rests its rulings on failure to pay sufficient heed to the
Constitution's proscriptions against monopolies that are not operating in the public interest. In this case,
petroleum refining was under the control of only three foreign firms. The Court’s view was that the new
law was insufficient to assure the legislative intent of increased competition downstream:
A market controlled by one player (monopoly) or dominated by a handful of players
(oligopoly) is hardly the market where honest-to-goodness competition will prevail.
Monopolistic or oligopolistic markets deserve our careful scrutiny and laws which
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Gokongwell v. SEC, et al. G.R. No. L-45911, 89 SCRA 339 (1979).
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