Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City {S RE Elven @
SEP 2013

SIXTEENTH CONGRESS
First Regular Session

House Bill No.__2672

Introduced by Representatives
DIOSDADO MACAPAGAL ARROYO and GLORIA MACAPAGAL ARROYO

AN ACT
PENALIZING UNFAIR TRADE AND ANTI-COMPETITIVE PRACTICES
IN RESTRAINT OF TRADE, UNFAIR COMPETITION, ABUSE OF
DOMINANT POWER, STRENGTHENING THE POWERS OF
REGULATORY AUTHORITIES AND APPROPRIATING FUNDS
THEREFOR, AND FOR OTHER PURPOSES,

EXPLANATORY NOTE

For far too long, our people have stood at the mercy of huge industries. Due to
lack of regulation and safeguards, unscrupulous businessmen have found ingenious
ways to artificially control prices and manipulate the free market system. It thus
behooves both Houses of Congress to establish a system that can adequately provide
protection to our people against price manipulators.

Article XII, Section 19, of the Constitution provides:

“Section 19. The State shall regulate or prohibit monopolies when
the public interest so requires. No combinations in restraint of trade or
unfair competition shall be allowed.”

As proof of the importance of this Constitutional mandate, Section 22 of the same
article encourages the promulgation of legislation that would impose civil and criminal
sanctions against those who circumvent or negate this principle. Hence, Section 22 of
the Constitution states:


“Section 22. Acts which circumvent or negate any of the provisions
of this Article shall be considered inimical to the national interest and
subject to criminal and civil sanctions, as may be provided by law.”

Although previous legislations have been passed pursuant to this Constitutional
mandate, the pressing demands of our time require us to introduce new legislation that
can effectively address these pressing concerns

We are therefore encouraging our colleagues to support the passage of this bill
that aims to provide stricter penalties against combinations or conspiracies in restraint
of trade and all forms of artificial machinations that will injure, destroy or prevent free
market competition.

For these reasons, the passage of this bill is earnestly recommended

DIOSDADO ra jAL ARROYO GL IACAPAGAL ARROYO
Second District, Camarines Sur cond District, Pampanga


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
First Regular Session

2672

House Bill No.

Introduced by Representatives
DIOSDADO MACAPAGAL ARROYO and GLORIA MACAPAGAL ARROYO

AN ACT
PENALIZING UNFAIR TRADE AND ANTI-COMPETITIVE PRACTICES
IN RESTRAINT OF TRADE, UNFAIR COMPETITION, ABUSE OF
DOMINANT POWER, STRENGTHENING THE POWERS OF
REGULATORY AUTHORITIES AND APPROPRIATING FUNDS
THEREFOR, AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines
in Congress assembled:

ARTICLE |
TITLE AND DECLARATION OF POLICY

SECTION 1. Title. - This Act shall be known and cited as the "Competition Act of
2013."

SECTION 2. Declaration of Policy. — In line with the constitutional mandate to
regulate or prohibit monopolies when the public interest so requires and prevent
combinations in restraint of trade or unfair competition, the State endeavors to’

a. Promote and enhance free and full competition in trade,
industry and all commercial economic activities;

b. Prevent the concentration of economic power in a few
persons who threaten to control the production, trade, or industry, stifle


competition, distort, manipulate or constrict the discipline of free markets,
or tamper with the free play of the market forces and eventually destroy
free and open markets; and

c. _ Penalize all forms of unfair trade, anti-competitive conduct
and combinations in restraint of trade, with the objective of protecting and
advancing consumer welfare.

ARTICLE Il
SCOPE AND APPLICATION, DEFINITION OF TERMS

SECTION 3. Scope and Application. - This Act shall be enforceable within the
territory of the Republic of the Philippines and shall apply to all areas of trade, industry
and commercial economic activity. It shall likewise be applicable to international trade
having substantial effects in the Republic of the Philippines including those that result
from acts done outside the Republic of the Philippines.

The Act shall apply to: (a) all firms as defined hereunder and all their commercial
agreements, actions or transactions involving goods, services or intellectual property;
and, (b) all natural persons who, acting in their capacity as owner, manager or
employee of a firm, shall authorize, engage or aid in the commission of restrictive
practices prohibited under this Act

SECTION 4. Definition of Terms. — As used in this Act, the following terms shall be
construed to mean as follows:

a. Cartel shall mean a combination of firms, providing goods in
relevant markets, acting or joined together to obtain a shared monopoly to
control production, sale and price, or to obtain control in any particular
industry or commodity, or a group of firms that agree to restrict trade to
their mutual benefit, which may or may not be of an international scale. It
shall also refer to firms or section of firms having common interest
designed to prevent extreme or unfair competition and allocate markets,
and to promote the exchange of knowledge resulting from scientific and
technical research, exchange of patent rights and standardization of
products;

b. Competition shall mean the process by which economic
agents, acting independently in a market, limit each other's ability to
control the prevailing conditions in the market;

c. Control refers to at least twenty percent (20%) ownership,
directly or indirectly, of a firm or a group of firms by another firm;


d. Firm shall include any person, partnership, combination or
association in any form, engaged directly or indirectly in any economic
activity: Provided that, two firms, one of which is controlled by the other,
shall be treated as one firm: Provided, further, That two or more firms that
are controlled by a single firm shall be treated as one firm;

@. Goods shall include all types of goods and services;

f. Market shall refer to a place or venue for commercial
activity, which may extend beyond the borders of the Republic of the
Philippines, where articles are bought or sold. It shall also refer to the
geographical or economic extent of commercial demand;

g. Monopoly shall mean a privilege or undue advantage of one
or more firms, consisting in the exclusive right to carry on a particular
business or trade, and/or manufacture a particular product, article or
object of trade, commerce or industry. It is a form of market structure in
which one or only a few firms dominate the total sales of a product,
commodity or service;

h Monopoly Power shall refer to a situation where a firm,
either by itself or acting in collusion with other firms, is in a position to
control a relevant market for the sale of a particular good or service by
fixing its prices, excluding competitor firm, or controlling the market in a
specific geographical area; and,

i. Relevant Market shall refer to the line of commerce in which
competition has been restrained. It shall also refer to the geographic area
involved, including all reasonably substitutable goods, and all nearby
competitors, to which consumers could turn if the restraint or abuse results
in the significant increase in prices.

ARTICLE Ill
PROHIBITED ACTS

SECTION 5. Cartels — It shall be unlawful for firms providing goods in relevant
markets to join together to monopolize, or to control production in a particular industry or
commodity, the sale and price of such good, and to agree to restrict trade for their
mutual benefit, which may or may not be on an international scale. This shall also
include an association by agreement of firms or sections of firms having common
interests designed to promote the interchange of knowledge resulting from scientific and
technical researches, exchange of patent rights and standardization of products.


Restrictive agreements resulting from carte-like behavior of firms, in any form,
are hereby per se deemed illegal. These shall include, but not limited to, the following

a. Agreements to fix selling price of goods or other terms of
sale;

b. Agreements to limit supply or output;

c. Agreements to divide the market, whether by volume of
sales or purchase or by territory, by type of goods sold, by customers or
sellers, or by any other means;

d, Agreements to exclude or limit dealings with particular
suppliers or sellers from supplying or selling goods, or customers from
acquiring or buying goods; and

e. Agreements to fix setting price at auctions or in any other
form of bidding.

There shall be a prima facie case for the existence of a cartel if and when the
Department of Trade and Industry (DTI) or concerned regulatory agency finds that two
‘or more persons or firms competing for the same relevant market perform uniform or
complementary acts among themselves which tend to bring about artificial and
unreasonable increase in the price of any goods or when they simultaneously and
unreasonably increase the prices of their competing goods thereby lessening
competition among themselves.

SECTION 6. Monopolies. — It shall be unlawful for any firm to willfully monopolize,
ot knowingly attempt to monopolize, the trade of goods or any part of the trade or
commerce within the Republic of the Philippines or with any foreign country or territory.
As prohibited in this Act, the essential elements of the crime of monopolization are the
possession of monopoly power and its willful acquisition, maintenance or abuse to
exclude competitors from any part of trade, commerce or industry as distinguished from
the natural growth or development of a firm as a consequence of a superior product,
business acumen or historic accident: Provided that, a firm that has at least fifty percent
(50%) of the relevant market as found and certified by the Department of Trade and
Industry or the concerned regulatory agency shall be deemed prima facie a monopoly or
in dominant position.

SECTION 7. Monopoly Power or Abuse of Market Power by One in Dominant
Position. — It shall be unlawful for one or more firms with market power within relevant
markets to abuse their monopoly power or dominant position by engaging in unfair
methods of competition or engaging in unfair or deceptive trade practices, or entering
into agreements, combinations in the form of trust or otherwise, or conspiracy, with the
purpose and effect to prevent, restrict, or distort competition. Abusive agreements such


as, but not limited to, any of the following, shall be deemed to fall under the crime of
abuse of monopoly power or market power by one in dominant position:

a. Price Fixing — Any agreement to fix the selling price of
goods or other terms of sale, with the purpose and effect of creating a
monopoly or cartel, or lessening competition;

b. Bid Rigging — Any agreement to fix price at auctions or in
any other form of bidding, with the purpose and effect of creating a
monopoly or cartel, or lessening competition, Provided that, nothing herein
shall bar another prosecution against the erring party for violation of
applicable laws on procurement and public biddings;

In determining whether there is price fixing or bid rigging, the
following circumstances may be considered:

i, generally, any considered evidence that two sellers of similar
goods have agreed to set the price of their goods, to sell only a certain
amount of their goods, or to sell only to a limited number of buyers or
consumers;

ii, a drastic change in prices of goods and services involving
more than one seller of similar goods of different brands, particularly if the
changes in prices take place in equal amount and about the same time;

iii, a seller refusing to sell based on an agreement with a
competitor;

iv. _ the same firm has repeatedly been the low bidder who has
been awarded contracts for a certain service or a particular bidder seems
to win bids on a fixed-rotation;

v2 there is an unusual and unexplainable difference between
the winning bid and all other bids; and

vi the same bidder bids substantially higher on some bids than
‘on others, and there is no logical cost reason to explain the difference.

c. Limitation and Control of Markets — Any agreement to
limit or control production, markets, technical development, or investment
with the purpose and effect of creating a monopoly or cartel, or lessening
competition;

d. Market Allocation — Any agreement to divide the market,
whether by volume of sales or purchase or by territory, by type of goods


sold, by customers or sellers or by any other means, with the purpose and
effect of creating a monopoly or cartel, or lessening competition;

e. Arrangements to Share Markets or Sources of Supply —
Any agreement to share markets or sources of supply of raw materials,
with the purpose and effect of creating a monopoly or cartel, or lessening
competition;

f Price Discrimination — Any agreement prescribing or
charging, directly or indirectly, discriminatory pricing terms or conditions in
the supply or purchase of goods of like grade and quality with the purpose
and effect of creating a monopoly or cartel, or substantially lessening
competition: Provided that, nothing contained herein shall be construed to
prohibit permissible price differentials unless the same shall have the
effect of preventing, restricting or distorting competition: Provided, further,
That for the purpose of this section, the following shall be considered
permissible price differentials:

i Socialized Pri
sector of the economy;

19 — Socialized pricing for the less fortunate

ii Volume Discounts — Price differentials which reflect an
allowance for differences in the cost of manufacture, sale, or delivery
resulting from differing methods or quantities in which the goods are sold
or delivered to the purchasers;

ii. Competitive Pricing — A price differential or other terms of
sale in response to the competitive price of payments, services or facilities
furnished by a competitor;

iv. Bona fide Selection of Customers — The selection of
customers on bona fide transaction; and,

v. Price Differentials Due to Changing Market Conditions
or Marketability of Goods — Price changes from time to time in response
to changing conditions affecting the market or the marketability of the
goods concerned such as, but not limited to, actual or imminent
deterioration of perishable goods, obsolescence of seasonal goods,
distress sides under court process, or sale on good faith in discontinuance
of business.

g. Exclusivity Arrangement — Any agreement imposing
restrictions on the lease or contract for sale or trade of goods concerning
where, to whom, or in what forms goods may be sold or traded, such as,
but not limited to fixing prices, or giving preferential discounts, or rebate
upon such price, or imposing conditions not to deal with competing firms,


where the purpose of such agreement is to lessen competition: Provided
that, nothing contained herein shall prohibit or render unlawful permissible
franchising, licensing or exclusive distributorship agreements.

h Tie-In Arrangements — Any agreement making the supply
of particular goods dependent upon the purchase or lease of other goods
from the supplier or his consignee, where the purpose and effect of such
sale or lease or such condition is to substantially lessen competition or to
create a monopoly or cartel.

i. Boycott — Any concerted refusal to sell or conspiracy not to
sell or to stop doing business on the part of the suppliers of any goods,
unless for a legitimate purpose, such as but not limited to:

i. Defaulting Borrowers — refusal by one or more credit
institutions to extend loans to defaulting debtors;

ii, Defaulting Buyers — refusal by one or more manufacturers
or sellers to sell on credit to defaulting customers; and,

iii, Violators of Intellectual Property Rights — refusal by
manufacturers or sellers to have any commercial dealings with one or
more firms who violate the intellectual property rights of the owners of
patents, copyrights, trademarks and other intellectual property.

ARTICLE IV
PENALTIES.

SECTION 8. Penalties. — Without prejudice to the violation of other laws, any firm
that shall be found to have violated Sections 5, 6 and 7 of this Act, or any combination
thereof, shall, for each and every violation, be punished by a fine of not less One Million
Pesos (Php1,000,000.00) and not exceeding Ten Million Pesos (Php10,000,000.00) if a
natural person; by a fine of not less than Ten Million Pesos (Php10,000,000.00) but not
exceeding One Hundred Million Pesos (Php100,000,000.00) if a firm, and by
imprisonment not exceeding ten (10) years, or both, at the discretion of the court.

ARTICLE V
ENFORCEMENT

SECTION 9. Preliminary Inquiry. - The Department of Justice (DOJ), in
coordination with the Department of Trade and Industry (DTI), other regulatory and/or
appropriate government agency, shall motu propio, upon the filing of a verified


complaint by an interested party or upon referral by the concerned regulatory agency,
initiate a preliminary inquiry for the enforcement of this Act based on reasonable
grounds.

SECTION 10. Powers of Concemed Regulatory Agencies. — Notwithstanding the
provisions of the preceding section, the exercise of regulatory powers by different
government agencies over an industry or a sub-sector of an industry shall be cumulative
and shall not be construed in any way as derogating from the power and authority of the
concerned agency. The government agencies shall cooperate and coordinate with one
another in the exercise of their powers in order to prevent overlap, to share confidential
information, or for other effective measures.

SECTION 11. Power to Investigate. - The DOJ may, through its duly authorized
inquiring officer, by written notice, require a firm or natural person to produce a specified
document, or to provide specified information which the DOJ considers as relevant its
investigation. The inquiring officer, upon the authority granted by the Secretary of
Justice, may engage the services of consultants or experts to aid in the inquiry. He may
also make use of any available or analogous means under existing laws and
procedures to determine if any provision of this Act has been violated. For this purpose,
he shall have the power to punish for contempt any firm which does not comply with the
notice or order for document, information or such other relevant matters and to impose
a fine not exceeding One Hundred Thousand Pesos (Php100,000.00) for non-
compliance with each notice or order.

SECTION 12. Self-incrimination and Privileged Communication Exclusion. —
Pursuant to the preceding section, a person subject of any investigation by the DOJ
shall produce the specified document or information when so required by written notice:
Provided that, no person shall be excused from disclosing any document or information
to the inquiring officer on the ground that the disclosure of the information or document
may be incrimination: Provided, however, That such document or information produced
by the person subject of investigation shall not be admissible as evidence against him in
criminal proceedings: Provided, finally, That such document or information shall he
admissible in evidence in civil proceedings including those arising from or in connection
to the implementation of this Act.

Nothing in this section shall compel the disclosure of privileged communication or
trade secrets: Provided, That the person who refuses to disclose the information or
produce the document or other material required by the inquiring officer in relation to the
preliminary inquiry being conducted shall nevertheless be obliged to give the name and
address of the firm to whom, or by whom, or on whose behalf, such privileged
communication was made.

SECTION 13. Immunity from Suit. — Any person or firm which cooperates or
furnishes any information, document or data to the DOJ before or during the conduct of
the preliminary inquiry that constitutes material evidence as determined by the DOJ
under this Act shall be immune from any suit or charge including from affected parties


and third parties: Provided, further, That any person or firm which cooperates or
furnishes information, document or data to the DOJ in connection to an investigation
being conducted shall not be subjected to any form of reprisal or discrimination:
Provided, furthermore, That such reprisal or discrimination shall be considered a
violation of this Act and subjected to the penalties provided for under Section 8:
Provided, finally, That, notwithstanding the provisions of Section 17 hereof, the firm
which cooperates with the DOJ in its investigation shall be entitled to a reward
equivalent to twenty percent (20%) of any monies paid by the firm subject of the inquiry,
or the monetary relief recovered from court action.

SECTION 14. Termination of Preliminary Inquiry. - The DOJ, after considering the
statements made, or documents or articles produced, in the course of an inquiry
conducted by it, shall terminate the preliminary inquiry by issuing a resolution ordering
its closure if no violation or infringement of this Act is found: or by issuing a nolo
contendere resolution; or to, singly or cumulatively: (a) endorse the findings to the
regulatory agency for the imposition of administrative fines; (b) institute a civil case for
damages; or (c) file a criminal case for violation of this Act or other relevant laws:
Provided that, for purposes of this Act, the preliminary inquiry referred to in Section 9 of
this Act shall fulfill the requirements of a preliminary investigation: Provided, further,
That no appeal can be taken from the said resolution unless issued with grave abuse of
discretion

SECTION 15. Nolo Contendere Resolution. — Any firm under inquiry under the
provisions of this Act may submit to a nolo contendere resolution at any time before the
termination of the preliminary inquiry by: a) the payment of an amount within the range
of penalties provided for under Section 8; b) by entering into an undertaking to
effectively stop and rectify the acts complained against, make restitution to the affected
parties, whether or not the parties are complainants or witnesses; and, c) by submitting
regular compliance reports as may be directed: Provided that, five percent (5%) of the
amounts paid under this section shall equitably accrue to the government agencies
involved in the inquiry: Provided, further, That a nolo contendere resolution shall not bar
any inquiry for the same or similar acts if continued or repeated.

SECTION 16. Court Action. — In addition to any criminal action, the DOJ, when
instituting the civil action, shall bring it in the name of the Republic of the Philippines, as
parens patriae, on behalf of persons residing in the Philippines, to secure treble
damages for any monetary injury sustained by such natural persons by reason of any
violation of this Act plus the cost of suit and a reasonable attorney's fee.

SECTION 17. Effect of Final Judgment. —The final judgment in an action brought
under the preceding section shall be res judicata as to any claim by any person on
whose behalf such action was brought: Provided that, such person notifies the court
having jurisdiction of the case within the period given by the court: Provided, further,
That such period shall not be less than ninety (90) days.

SECTION 18. Distribution of Monetary Relief Recovered. — The monetary relief
recovered in a civil action under Section 15 of this Act shall be distributed in the


following manner: (1) as determined and to be authorized by the Regional Trial Court
having jurisdiction of the case; (2) ten percent (10%) of the total amount of monetary
relief shall accrue to the DOJ to be used in the enforcement of this Act; and, (3) the
remainder of which total amount of monetary relief shall be deemed a civil penalty by
the Regional Trial Court and shall be deposited to the National Treasury as part of the
general fund of the government: Provided that, any distribution procedure adapted by
the Regional Trial Court shall afford each person having an interest in the monetary
relief a reasonable opportunity to secure his appropriate portion of the net monetary
relief obtained.

SECTION 19. Evidential Effect of a Final Judgment. - Any final judgment rendered
in any civil or criminal action brought by the DOJ on behalf of the People of the
Philippines under this Act to the effect that a defendant has violated any or all of the
provisions of this Act shall be prima facie evidence against such defendant in any civil
action brought by any other party against such defendant under this Act as to all matters
respecting which said judgment would he an estoppel as between the parties
concerned.

ARTICLE VI
OTHER PROVISIONS

SECTION 20. Statute of limitations. - Any civil or criminal action to enforce any
cause of action arising from a violation of any provision of this Act shall he forever
barred unless commenced within ten years (10) years after the cause of action accrues.
The running of the statute of limitation shall be suspended during the pendency of any
proceeding.

SECTION 21. Imposition of Fines by Regulatory Agency. — Notwithstanding any
provisions of law, regulatory agencies shall, in the conduct of their functions or duties,
have the power to impose fines in the amount not less than One Hundred Thousand
Pesos (Php100,000.00) and not exceeding Five Million Pesos (Php§,000,000.00), if a
natural person; and not less than Five Million Pesos (Php5,000,000.00) and not
exceeding Fifty Million Pesos (Php50,000,000.00) if a firm for each violation of or non-
compliance with an order or notice of the regulatory agency. Ten percent (10%) of such
fines shall accrue to the budget of the regulatory agency for the exclusive use in the
enforcement of this Act.

SECTION 22. Prohibition on the Issuance of Temporary Restraining Orders,
Preliminary Injunctions and Preliminary Mandatory Injunctions. - Except for the
Supreme Court, no other court shall issue any temporary restraining order, preliminary
injunction or preliminary mandatory injunction against the regulatory agency in the
‘exercise of its duties or functions: Provided that, this prohibition shall apply in all cases,
disputes or controversies instituted by a private party, including, but not limited to, cases
filed by regulated firms or those claiming to have rights through such firms: Provided,

10


however, That, this prohibition shall not apply when the matter is of extreme urgency
involving a constitutional issue, such that the non-issuance of a temporary restraining
order will result in grave injustice and irreparable injury to the public: Provided, further,
That, the applicant shall file a bond, in an amount to be fixed by the court, but in no case
shall it be less than half of the imposable fines provided for under Section 21 of this Act:
Provided, finally, That in the event that the court finally decides that the applicant was
not entitled to the relief applied for, the bond shall accrue in favor of the regulatory
agency.

Any temporary restraining order, preliminary injunction or preliminary mandatory
injunction issued in violation of this section is void and of no force and effect. Any judge
who violates this section shall be penalized by suspension of at least one (I) year
without pay in addition to other criminal, civil or administrative penalties

The Supreme Court may designate regional trial courts to act as commissioners
with the sole function of receiving facts of the case involving the acts of the regulatory
agency. The designated Regional Trial Court shall, within thirty (30) days from the date
of receipt of the referral, forward its findings of facts to the Supreme Court for
appropriate action.

SECTION 23. Intellectual Property Rights. - The implementation of the provisions
of this Act shall be without prejudice to the rights, liabilities and remedies under
Republic Act No. 8293, otherwise known as the Intellectual Property Code of the
Philippines: Provided that, the exercise of intellectual property rights shall not in any
way be used to justify violations of this Act

SECTION 24. Guidelines. - The DOu, in consultation with the DTI, shall prepare

the necessary guidelines for the implementation of this Act: Provided that, where the

guidelines would apply to an industry or a sub-sector of industry that is subject to the

jurisdiction of a regulatory agency, the DOJ shall, in preparing the guidelines, consult

with the concerned regulatory agency: Provided, further, That the DOJ may revise such

guidelines it deems necessary: Provided, however, That such revised guidelines shall
only take effect following its publication in two newspapers of general circulation

SECTION 25. Separability Clause.- If any clause, sentence, section or part of this
‘Act shall be adjudged by a court of competent jurisdiction to be invalid, such judgment
shall not affect, impair or invalidate the remainder of this Act, but shall be confined in its
operation to the clause, sentence paragraph, section, or part thereof directly involved in
the controversy.

SECTION 26. Repealing Clause. — All provisions of law, orders, decrees, executive
‘orders, including rules and regulations or parts thereof, which are contrary to or
inconsistent with the provisions of this Act are hereby repealed or modified accordingly.


SECTION 27. Effectivity Clause. - This Act shall take effect fifteen (15) days
following its publication in the Official Gazette or in at least two (2) national newspapers
of general circulation

Approved,