Philippine Competition Law

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Questions and Answers

What conduct is prohibited by entities with a dominant position?

Selling goods or services above cost

Allowing competitors to grow within the market

Developing superior products or processes

Imposing barriers to entry for competitors (correct)

Which agreements may not be considered a violation of the law?

Agreements that improve production or distribution (correct)

Agreements that limit technical development

Agreements that control investment

Agreements that divide or share the market

In what situation are entities not considered competitors according to the text?

When they are under common control with another entity

When they have common economic interests (correct)

When they act independently of each other

When they control the market

What is the purpose of entities selling goods or services below cost?

To drive competition out of the market Signup and view all the answers

Which action would not be considered an abuse of dominant position according to the text?

Developing a superior product Signup and view all the answers

What is one reason an entity may impose barriers to entry without violating the law?

Developing a superior product or process Signup and view all the answers

What is the scope of the Philippine Competition Law as stated in R.A. No. 10667?

Enforceable against any person or entity engaged in trade, industry, and commerce in the Philippines Signup and view all the answers

Which of the following is NOT covered by the Philippine Competition Law?

Combination activities of workers for collective bargaining purposes Signup and view all the answers

What type of agreements between competitors are per se prohibited under the Philippine Competition Law?

Agreements restricting competition on price or terms of trade Signup and view all the answers

Which of the following is an example of an anticompetitive practice under the Philippine Competition Law?

Covert bidding practices Signup and view all the answers

What does R.A. No. 10667 prohibit between or among competitors under the Philippine Competition Law?

Bid manipulation practices like bid suppression and rotation Signup and view all the answers

Which activities are exempted from the application of the Philippine Competition Law?

Combinations or activities of workers solely for facilitating collective bargaining Signup and view all the answers

What action is prohibited for agreements exceeding one billion pesos until notification to the Philippine Competition Commission is provided?

Consummating the agreement Signup and view all the answers

What is the consequence of an agreement being consummated without notifying the Philippine Competition Commission?

Void agreement status Signup and view all the answers

Which of the following is NOT a possible action by the Philippine Competition Commission upon determining a prohibited agreement?

Enforce litigation Signup and view all the answers

For what reason would acquiring stock or share capital solely for investment purposes not be prohibited?

To influence competition Signup and view all the answers

What is the range of administrative fine that parties may face for consummating an agreement without notifying the Philippine Competition Commission?

1% to 5% of transaction value Signup and view all the answers

If an agreement does not qualify for exemption, what action can the Philippine Competition Commission take?

Prohibit the agreement implementation entirely Signup and view all the answers

What is it called when a supplier makes the supply of certain goods or services dependent on the purchase of other goods or services that are not directly related?

Bundling Signup and view all the answers

Which practice involves imposing unfairly low purchase prices on marginalized agricultural producers and small businesses?

Predatory pricing Signup and view all the answers

What is prohibited in the context of mergers and acquisitions if it significantly hinders competition in the relevant market?

Prohibited agreements Signup and view all the answers

Which scenario might exempt a merger or acquisition agreement from prohibition according to the text?

Causing financial failure Signup and view all the answers

What does it mean when an entity limits production, market, or technical development to the detriment of consumers?

Anticompetitive behavior Signup and view all the answers

In the context of competition, what is the term for imposing unfair prices on competitors, customers, suppliers, or consumers?

Price gouging Signup and view all the answers

What does a relevant product market consist of?

Goods and services regarded as interchangeable or substitutable by consumers Signup and view all the answers

How is the relevant geographic market defined?

By the area in which entities are involved in supply and demand of goods and services Signup and view all the answers

Why are goods and services in a relevant product market considered substitutable?

Due to varying characteristics, prices, and intended use Signup and view all the answers

How can neighboring areas be distinguished in terms of relevant geographic markets?

Due to differences in competition conditions Signup and view all the answers

What differentiates a relevant market from a relevant product market?

Includes both relevant geographic market and relevant product market Signup and view all the answers

Study Notes

Prohibited Conduct of Entities with Dominant Positions

Entities with a dominant position are prohibited from engaging in practices that may hinder competition or create unfair market conditions.
Examples of prohibited practices include:
- Predatory pricing: Selling goods or services below cost to drive out competitors.
- Refusal to deal: Unjustifiably refusing to supply goods or services to certain businesses or individuals.
- Tying: Making the purchase of one product or service dependent on the purchase of another.
- Exclusive dealing: Restricting customers from buying goods or services from competitors.

Agreements that May not Violate the Law

Agreements that do not substantially lessen competition are not considered violations of the law.
Examples of such agreements:
- Agreements for collaboration or research and development
- Agreements for sharing infrastructure or facilities
- Agreements for joint marketing or distribution

Entities Not Considered Competitors

Entities are not considered competitors if they operate in different markets or offer distinct products and services.
Example: A company selling software is unlikely to be considered a competitor to a company selling hardware.

Purpose of Selling Goods or Services Below Cost

Selling goods or services below cost is often done by entities with a dominant position to eliminate competitors or gain market share.

Actions Not Considered an Abuse of Dominant Position

Certain actions by entities with dominant positions may not be considered an abuse of dominance if they are justified by efficiency or consumer welfare.
Example: A dominant entity may offer lower prices to attract more customers, thereby promoting competition and benefiting consumers.

Reasons for Imposing Barriers to Entry

Entities may impose barriers to entry to protect their market share, but this is not always unlawful.
Legal reasons for imposing barriers to entry:
- Investing in research and development
- Developing innovative products or services
- Building a strong reputation in the market

Scope of the Philippine Competition Law (R.A. No. 10667)

The Philippines Competition Law aims to promote competition in the Philippine market, prevent monopolies, and protect consumers from unfair business practices.
Scope: The law covers all industries, including manufacturing, retail, services, and agriculture.

Entities NOT Covered by the Philippine Competition Law

The Philippine Competition Law does not apply to activities regulated by other laws.
Examples:
- Activities regulated by the Securities and Exchange Commission (SEC)
- Activities regulated by the Bangko Sentral ng Pilipinas (BSP)

Anticompetitive Agreements between Competitors

Per se prohibited agreements under the Philippine Competition Law:
- Price fixing
- Market allocation
- Bid rigging

Anticompetitive Practices under the Philippine Competition Law

Examples of anticompetitive practices:
- Predatory pricing: Selling goods or services below cost to eliminate competitors.
- Refusal to deal: Unjustifiably refusing to supply goods or services to certain businesses or individuals.

R.A. No. 10667 Prohibitions for Competitors

R.A. No. 10667 prohibits agreements between or among competitors that hinder competition or create unfair market conditions.
Examples:
- Agreements to fix prices
- Agreements to divide markets
- Agreements to boycott other businesses

Activities Exempted from the Philippine Competition Law

Certain activities are exempt from the application of the Philippine Competition Law due to public interest considerations.
Examples:
- Agreements for the development of infrastructure projects
- Agreements for the provision of essential services
- Agreements for the promotion of agricultural production

Notification Requirement for Agreements Exceeding One Billion Pesos

Agreements exceeding one billion pesos must be notified to the Philippine Competition Commission before they are consummated.

Consequences of Consummation Without Notification

Consummating an agreement exceeding one billion pesos without notifying the Philippine Competition Commission is a violation of the law.
Consequences:
- Administrative fines
- Injunctions
- Other sanctions

Actions of the Philippine Competition Commission

The Philippine Competition Commission (PCC) is responsible for enforcing the Philippines Competition Law.
The PCC has the power to investigate suspected violations of the law and impose sanctions on violators.
Possible actions by the PCC:
- Issue cease and desist orders
- Impose fines
- Order the divestiture of assets

Acquisitions for Investment Purposes

Acquiring stock or share capital solely for investment purposes is not prohibited under the Philippine Competition Law, unless it results in a substantial lessening of competition.

Administrative Fines for Non-Notification

The administrative fine for consummating an agreement without notifying the PCC is a range of ₱1 million to ₱250 million.

Action by the PCC for Non-Exempt Agreements

If an agreement does not qualify for exemption, the PCC can issue a cease and desist order, impose fines, and order the divestiture of assets.

Tying Arrangements

Tying: A supplier makes the supply of certain goods or services dependent on the purchase of other goods or services that are not directly related.

Predatory Pricing:

Predatory pricing: Involves imposing unfairly low purchase prices on marginalized agricultural producers and small businesses.

Prohibited Mergers and Acquisitions

Mergers and acquisitions that significantly hinder competition in the relevant market are prohibited under the Philippine Competition Law.

Exemption from Mergers and Acquisition Prohibition

A merger or acquisition agreement may be exempted from prohibition if it is beneficial to consumers and improves competition in the relevant market.

Limiting Production, Market, or Technical Development

An entity that limits production, market, or technical development to the detriment of consumers may be considered to be engaging in anticompetitive practices.

Unfair Pricing Practices (Predatory Pricing)

Predatory pricing is an unfair pricing practice used to drive out competition and gain market share; it involves imposing unfairly low prices on competitors, customers, suppliers, or consumers.

Relevant Product Market

A relevant product market consists of goods or services that are considered substitutable from the consumers' perspective.

Relevant Geographic Market

The relevant geographic market is the area in which consumers can reasonably purchase goods or services from competing suppliers.

Substitutability in the Relevant Product Market

Goods and services are considered substitutable in a relevant product market if consumers could readily switch to alternative products or services if the price of the product in question increases.

Distinguishing Neighboring Areas

Neighboring areas are distinguished in terms of relevant geographic markets based on factors such as consumer travel patterns, transportation costs, and the availability of substitutes.

Relevant Market vs. Relevant Product Market

The relevant market encompasses both the relevant product market and the relevant geographic market.
Example: The relevant market for a restaurant might be "casual dining restaurants in the City of Manila".
Relevant product market: "Casual dining restaurants"
Relevant geographic market: "City of Manila"

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Test your knowledge of the Philippine Competition Law under Republic Act No. 10667, which applies to individuals and entities engaged in trade, industry, and commerce within the Philippines. Explore the scope, application, and implications of this law.

Philippine Competition Law - R.A. No. 10667

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