Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

HOUSEBILLNO.__ 3244

Introduced by HON. GLORIA MACAPAGAL ARROYO

EXPLANATORY NOTE

Section 19 of Article XII of the 1987 Constitution mandates the State to “regulate
or prohibit monopolies when the public interest so requires.” Article 186 of the Revised
Penal Code penalizes monopolies in restraint of trade.

In our quest for national development, an open economy that is free and fosters
competition is a necessary prerequisite. A closer examination of our history would
reveal that our underdevelopment was caused by lack of competition in our economy.
Given this past experience and the direction in the international economy towards
liberalization and globalization, various administrations have introduced reforms to
promote competition in the form of lowering of trade and investment barriers,
deregulation of certain industries to attract investments from more players,
privatization of certain industries, among others.

Admittedly, while these measures achieved positive results, the country has yet
to adopt a legislation that would institutionalize a responsive and comprehensive
framework for anti-trust policy. As early as the Ninth Congress, this Representation
fully aware and cognizant of the ill-effects in the economy of restrained and curtailed
competition filed a legislative measure that would restore competition where it has
disappeared, preserve it where it still exists and institutionalize it as a system for
controlling and regulating the economy of the country pursuant to the mandate of the
Constitution.

To sustain the momentum we have gained over the past nine (9) years and to
ensure a healthy, open and competitive economy, the passage of his bill is urgently and
earnestly requested.

GLORJA MACAPAGAL ARROYO.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

HOUSE BILLNO._3244

Introduced by HON. GLORIA MACAPAGAL ARROYO

AN ACT
CREATING THE FAIR TRADE COMMISSION OF THE PHILIPPINES

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

SECTION 1. Objectives. - It is the declared policy of the State that all sectors of
the economy and all regions of the country shall be given optimum opportunity to
develop; that a trade policy be pursued that serves the general welfare; that when
public interest so requires, the State shall regulate or prohibit monopolies; that no
combinations in restraint of trade or unfair competition shall be allowed and that
consumers shall be protected from trade malpractices and Filipino enterprises against
unfair foreign competition and trade practices.

SEC.2. Scope of Application. ~ This Act shall apply to all persons, whether
natural or juridical, such as, firms, partnerships, corporations, companies, associations,
or any combination thereof, irrespective of the mode of creation, or control of
ownership including their branches, subsidiaries, affiliates, or other entities directly or
indirectly controlled by them, which are engaged in all commercial transactions or
activities, involving goods and services.

SEC. 3. Definition of Terms For purposes of this Act, the following
definition of terms shall be adopted:

a, Entrepreneur - means, a person, juridical or natural, who carries on a
commercial, industrial, financial or any other business activity. Any officer or
duly authorized employee, agent, or person, who acts for the benefit of any
entrepreneur, shall also be deemed covered by this Act.

b. Competition - means a situation in which two or more entrepreneurs, do, ot may
within the scope of their business activities, and without undertaking any
significant change in their business activities, engage in any of the following acts:

1. Supplying the same or similar goods or services to the same consumers or
customers;

2. Getting supplies of the same or similar goods or services from the same
supplier. !

¢. Unreasonable Restraint of Trade - means, such business activities, by which

entrepreneurs by contract, agreement, or any other concerted activities mutually

restrict or conduct their business activities in such a manner as to fix, maintain or

enhance prices, or to limit production, technology, products, facilities, or

customers and suppliers, thereby causing, contrary to public interest, a
substantial restraint of competition in a particular field of trade.


d, Unfair Business Practices - means any act which tends to impede fair competition
and which is hereinafter designated as such by the Fair Trade Commission.

SEC. 4, Unfair Business Practices. - It shall be unlawful for any person to engage in
unfair business practices. For purposes of this Act, unfair business practices shall be
divided into two groups: a) general which are applicable to all fields of business, and; b)
specific which are applicable to a particular field of activity.

A. General Business Practices. The following are considered general unfair
business:

1. Unreasonable refusal to deal, such as, refusing or limiting supply of
commodities or services from or to an entrepreneur without any
justifiable reason:

2. Discriminator business terms, such as, without justifiable reason,
favorable or unfavorable treatment with respect to terms or execution
of transactions on the basis of the region of the customer;

3. Group boycott, joint discrimination, such as, performing jointly
without justifiable reason such acts as refusal to deal, or having trade
partners perform acts rendering disadvantage to them;

4. Discriminatory Prices, such as supplying or __ receiving
commodities/services at prices which unreasonably discriminate on
the basis of region or customer;

5. Unreasonably low or high prices, such as supplying commodities or
services for an unreasonably high consideration to exclude
competitors;

6. Unjustifiably luring of customers from competitors such as, inducing
customers to transact business with oneself by offering unfair or
excessive advantages in light of normal business practices;

7. Undue representation such as, deceptively or exaggeratedly
representing the items such as price size, origin, packing or
deceptively stating that one’s products are better than those of the
competitor;

8. Undue Coercion, such as, coercing customers to transact business by
threatening undue disadvantages in light of normal business practices;

9. Abuse of one’s superior position, such as business, with a customer on
unreasonably unfavorable terms by using the fact that one’s position is
superior than the customer's;

10. Transactions with exclusive terms, such as, without justifiable reason,
requiring as a condition of transacting business with third parties, that
they do not transact business with one’s competitors;

11. Transaction with restrictive terms , such as, without justifiable reason,
entering into transactions with customers on such terms as restricting
the sales territory or trade partner;

12, False exaggerated advertisement, such as, inducing consumers by false
or exaggerated advertisement of trade specifications.

SEC.5 — Monopolistic Practices. - Every person who shall monopolize, or attempt
to monopolize or combine or conspire with any other person, monopolize any part of
the trade or commerce within the Philippines or with foreign countries, shall be deemed
guilty under this Act and shall be punished by a fine of at least P150,000 or by
imprisonment of a maximum period of six years or both.

The following are considered monopolistic and are illegal:
1. Where a person either by himself or acting together with a few enterprises is ina

position to control the relevant market for a particular good or service or groups
of goods or services through the following abusive acts:


a. Predatory behavior towards competitors, such as, using below-cost pricing to
eliminate competitors;

b. Discriminatory pricing or terms or conditions in the supply or purchase of
goods or services, including by means of the use of pricing policies in
transactions between affiliated enterprises which overcharge or undercharge
for goods or services purchased or supplied as compared with prices for
similar or comparable transactions outside the affiliated enterprises;

c. Fixing the prices at which goods sold can be resold including those imported
and exported;

d. Partial or complete refusal to deal on an enterprise’s customary commercial
terms, so as not to ensure equality, safety of adequate distribution of goods or
services;

. Making the supply of particular goods or services dependent upon the
acceptance of restrictions on the distribution or manufacture of competing or
other goods so as not ensure equality, safety or adequate distribution of
goods or services;

f. Imposing restrictions concerning where, to whom, or in what form, or
qualities, goods supplied or other goods may be resold or exported;

g Making the supply of particular goods or services dependent upon the
purchase of other goods or services from the supplier or his designee;

v

. Mergers, takeovers, joint ventures, or other, acquisitions of control, including
interlocking directorships, whether horizontal, vertical or conglomerate in nature
when the resultant market share in the country as a whole or in any region
relating to any product or service, will amount to more than fifty (50%) percent
of the relevant market, or any of the participating enterprises, including those
under common control, whether or not established in the country has a total
asset value of more than P20M.

This section shall not apply to mergers or consolidations of financial institutions
under the system of universal banking where such merger or consolidation is approved
by the Monetary Board of the Bangko Sentral ng Pilipinas.

This section likewise overrules liability when the person who has acquired an
overwhelming share of the market owes its share solely to the support skill, superior
products, natural advantages (including accessibility to raw materials or markets),
economic or technological efficiency (including scientific research), low margins of
profits maintained permanently and without discrimination or license conferred by and
used within the limits of law (including patents on one’s own inventions, or franchise
granted directly to the enterprise by a public authority.)

SEC. 6 Unfair Trade Practices by Trade Associations A trade association is an
organization, or association of producers or distributors of a commodity or service for
the benefit of the member and for the purpose of promoting the business of its branch of

industry or commerce. It may be incorporated or unincorporated, and national or local
in scope.

The following activities of trade associations are declared illegal and, therefore,

punishable under this Act by a fine of not less than P 1M or maximum imprisonment of
6 years or both at the discretion of the court:

i
a. Fixing or attempting to fix, establish or maintain prices at which handlers or
processors of certain goods or commodities to the purchasers thereof;

Restricting, limiting, or attempting to do so, the volume or quantity of goods
to be distributed or sold to purchasers;

. Restricting or denying membership or using meeting to control trade

practices;
d. Unreasonable trading time limitations;
e. Conspiring with intent to boycott;

b.


f. Acts tending monopoly; and,
g. Allother acts which restrain or suppress competition.

SEC. 7. Consumers’ Protection. - Manufacturers, producers, importers,
wholesalers and retailers are prohibited from engaging in the following acts:

a. Hoarding or destroying or consumer goods or rendering them unserviceable,
or destroying the means or production or distribution, whether directly or
indirectly or through third parties, with the purpose of bringing about a price
increase;

b. When engaged in the manufacture or importation of products, failing to
ensure an adequate supply of spare parts and replacements, or failing to
maintain an adequate after-sales service for consumers, except for reasons
outside their control;

c. Declining liability for defective products or services rendered not meeting the
supplier's description of such goods and services.

d. Inconnection with the supply of product or services, making any warranty:

i. limited to a particular geographic area or sales point;

ii, falsely representing that product are of a particular style or model;

iii, falsely representing that the goods are new or of a specified age;

iv. representing that products or services have any sponsorship, approval,
performance and quality characteristics, components, materials,
accessories, uses or benefits which they do not have.

e. Engaging in conduct that is liable to mislead the public as to the nature,
price, availability, characteristics, suitability for a given purpose, or quality of
any products or services;

£ Engaging in the offering of gifts and prizes with the intention of not
providing them and offering price reductions for products available in
unreasonably limited quantities; and

g. Supplying any product which is liable to cause injury to health or physical
harm to consumers, when properly used, or which does not comply with a
consumer safety standard which has been prescribed. Any person who is
guilty of any of the acts hereunder enumerated shall be punished by a fine of
not less than P150,000 or by imprisonment of a maximum period of six years
or both in the discretion of the court.

SEC. 8. Implementing Agency. The Department of Trade and Industry (DTI)
shall be the administrative implementing body of the provisions and intent of this Act.
Where a claim is cognizable in the first instance by the DTI alone, judicial interference
shall be withheld until the administrative process has run its course.

To enable the Department to effectively implement the provisions and intent of
this Act and its implementing rules and regulations it is hereby authorized to:

1. Prescribe and promulgate within six (6) months such rules and regulations, as it
may deem necessary to effectively implement the provisions and intent of this

Act, and said rules and regulations shall take fifteen (15) days following their

publication in a newspaper of general circulation or in the Official Gazette;

. Conduct investigation, hearing and inquiry, as it may deem necessary for the
following purposes, inter alia:

a. determine if this Act needs amendments;

b. determine the appropriate rules and regulations, policies and
programs for this Act; i

¢. determine the nature, organization, and resources of any person,
firm, entity or association doing business in the Philippines;

d. determine the practices, acts, methods, schemes, and arrangements
used in the trade, industry, and business: and.


e. determine if a certain person, firm, entity or association has
violated or is about to violate any provisions of this Act or its rules
and regulations.

The officials and employees authorized to conduct the investigation, hearing and
inquiry referred to in this subsection shall have the power to administer oath, issue
subpoena and subpoena duces tecum to compel the attendance of witnesses and the
production of the necessary papers and documents, take data, testimony, and evidence,
and to punish direct and indirect contempt as granted to superior courts under Rule 71
of the Rules of Court.

3. Require any person, firm, entity or association to submit to it periodically or
whenever necessary, such report, data, information, paper or document it may
deem necessary;

4. Administratively adjudicate violations of this Act and its rules and regulations in
accordance with executive Order No. 913, Series of 1983 and its implementing
rules;

5. Inspect, periodically or whenever necessary

a. Any pertinent factory, shop, laboratory, establishment, store,
warehouse, any means of transportation, and the like;

b. Any pertinent equipment, finished or unfinished products, raw
materials, containers, labellings, and other pertinent properties found
therein;

c. Any pertinent papers, documents and records found therein; and,

d. Any pertinent work/activity being undertaken in said place.

The officials/employees authorized to conduct such inspection may obtain
reasonable quantity of samples of the properties (except equipment) mentioned in the
preceding paragraph; to take pictures or video tape of the places and things mentioned
in paragraphs (a) and (b); and secure copies of the papers mentioned in paragraph (c).
All acts authorized under this subsection shall be conducted at reasonable hours, with
reasonable promptness, in a professional manner, and without undue disturbance to
any legitimate work/activity being undertaken inside said places. Receipts shall be
issued for samples so obtained; and,

6. Perform such other functions as may be necessary to effectively implement the

provisions and intent of this Act. And regulations or to determine compliance
therewith.

Whenever any violation of the provisions of this Act is committed by a
corporation/association, the officer or employees immediately responsible, the
President, as well as, the Directors and manager of said corporation/ association, or the
agent representative in the Philippines in case of a foreign corporation/ association, who

shall have knowingly permitted or failed to prevent the commission of such violations,
shall be held as principals thereof.

Any property used in the commission of said violation shall be forfeited in favor
of government.

SEC. 9 Repealing Clause. - Articles 186,187, and 188 of the Revised Penal Code
are hereby repealed. All laws and rules inconsistent with the provisions herein are
hereby repealed, amended or modified accordingly

SEC. 10 Affectivity Clause- This Act shall take effect upon its approval.

Approved,