Competition Law PDF

Competition Law Atty. Jared Rivera Keyboard Warriors |1 CONSTITUTIONAL BASIS privately profitable to do so. On the other...

Competition Law Atty. Jared Rivera Keyboard Warriors |1 CONSTITUTIONAL BASIS privately profitable to do so. On the other hand, "consumers can obtain the amounts The State shall regulate or prohibit monopolies when the of goods or services they require at the public interest so requires. No combinations in restraint of price they are required to pay resources trade or unfair competition shall be allowed. (Article XII, are allocated precisely according to their Section 19, 1987 Constitution) wishes. CHAPTER I 2. There is productive efficiency if: GENERAL PROVISIONS a. goods and services are produced at the Three Pillars of Competition Law lowest cost possible. b. achieved because a producer is unable to anticompetitive agreements, sell above cost (if it did so, customers abuse of dominant position, and would immediately desert it) and it will anticompetitive mergers and acquisitions. not of course sell below cost (because then it would make no profit). Competition 3. There is dynamic efficiency if there is A situation in a market in which firms or sellers innovation and technological progress. independently strive for the patronage of buyers in order to achieve a business objective such as profit, sales, or market Consumer share. All direct or indirect users of the products covered by the Competition Law agreement, including producers that use the products as an input, wholesalers, retailers and final consumers, i. e., The set of rules and regulations that safeguard competition natural persons who are acting for purposes which can be and Implement competition policy. It aims to protect the regarded as outside their trade or profession. competitive process within the market for the benefit of consumers. Consumer Welfare Market Power It refers to the individual benefits derived from the consumption of goods and services. The ability of a firm (or a group of firms) to raise and maintain price above the level that would prevail in a Consumer Surplus competitive market. The excess of social valuation of product over the price Equilibrium Price actually paid. It is measured by the area of a triangle below a demand curve and above the observed price. Also called a market clearing price because it is at this price that the quantity that the producers offer to the market will Consumer Protection be purchased by consumers, with nothing left over. This condition is considered efficient because there is no excess It is essentially aimed at directly protecting end-users or the supply or wasted output. and there is no shortage. public against fraud and unfair practices in the marketplace, including defective goods and services. Perfect Competition Fair Competition Under conditions of perfect competition, allocative, productive, and dynamic efficiency will be achieved, and The concept of "fair competition" has two meanings: consumer welfare will be maximized. 1. fairness between the provider of goods or 1. There is allocative efficiency if services and the consumer and a. economic resources are allocated between 2. fairness between competitors offering similar different goods and services in such a way goods or services. that it is not possible to make anyone Unfair Competition better off without making someone else worse off. Two characteristics of unfair competition: b. achieved because "the producer will expand its production for as long as it is  Competition Law Atty. Jared Rivera Keyboard Warriors |2 1. it must involve an injury to a competitor or Restraint of Trade trade rival 2. it must involve acts which are characterized as A combination in restraint of trade is an agreement or 'contrary to good conscience,' or 'shocking to understanding between two or more persons, in the form of judicial sensibilities,' or otherwise in the a contract, trust, pool, holding company, or other form of language of our law, these include force, association, for the purpose of unduly restricting intimidation, deceit, machination or any other competition, monopolizing trade and commerce in a certain unjust, oppressive or high-handed method. commodity, controlling its production, distribution and price, or otherwise interfering with freedom of trade Monopoly without statutory authority. It is a privilege or peculiar advantage vested in one or more Joint Memorandum Circular No. 1 persons or companies consisting in the exclusive right or power to carry control the sale or the whole supply of a All government agencies are to be guided by the following particular commodity. elements in the exercise of their respective functions: 1. Policies and government interventions must Is monopoly absolutely prohibited? be pro-competitive i.e.. promote market No. The Supreme Court has ruled that the Constitutional efficiency and enhance consumer welfare; policy does not necessarily prohibit monopolies. The use of the word "regulate" in the Constitution indicates that some 2. Competitive neutrality: GOCCS shall not monopolies, when properly regulated, may be allowed. To enjoy competitive advantages or be "regulate" includes the power to control, to govern, and subjected to disadvantages over the private synonymous with suppressing or prohibiting to restrain but sector on the basis of their public sector not private monopolies are not absolutely prohibited by the ownership; and constitution, it may be allowed but regulated if public interest so requires (see in Introduction). 3. Uphold the original and primary jurisdiction of the PCC in the enforcement of competition Natural Monopoly laws. It may occur in a situation where "the economies of scale are Policy Objectives under the PCA so great that having two or more competing producers would not be viable and so efficiency dictates that the firm 1. to enhance economic consumer welfare, and serves the entire market. 2. to advance domestic and international trade efficiency, Ex. public utilities that require significant capital 3. to promote free and fair competition investment in infrastructure 4. to prevent economic concentration that will unduly stifle competition Oligopoly 5. to protect consumer welfare Oligopoly arises in "concentrated markets," i.e., where there 6. to advance domestic and international trade are only few sellers, and each seller takes into account the and economic development. objectives. reactions of its rivals when making pricing and output SCOPE AND APPLICATION decisions. In light of their small number, the players recognize that their output and pricing decisions mutually This Act shall be enforceable against any person or entity affect each other. engaged in trade, industry and commerce in the Republic of the Philippines. It shall likewise be applicable to Economic Concentration international trade having direct, substantial, and Economic concentration, also referred to as market reasonably foreseeable effects in trade, industry, or concentration, as "the extent to which market shares are commerce in the Republic of the Philippines, including concentrated between a small number of firms. It is often those that result from acts done outside the Republic of the Philippines. taken as a proxy for the intensity of competition. A market characterized by a few large firms with large market shares, This Act shall not apply to the combinations or activities such as an oligopolistic market, is considered to have a high of workers or employees nor to agreements or market concentration. arrangements with their employers when such combinations, activities, agreements, or arrangements  Competition Law Atty. Jared Rivera Keyboard Warriors |3 are designed solely to facilitate collective bargaining in b. The recommendation must be intended to respect of conditions of employment. align actions c. The conduct must have sufficient capacity The PCA applies to any person or entity engaged in trade, to influence the market. industry, or commerce within the Philippines as well as international trade which has direct, substantial and 2. Concerted action foreseeable effects on trade, industry or commerce in the Philippines. A form of coordination between entities which without having reached the stage where an Extra-territoriality principle gives the PC jurisdiction agreement properly so called has been over such agreements and conduct and allows enforcement concluded, knowingly substitutes practical of the provisions of the PA against such infringements in cooperation between them for the risk of order to protect competition within the Philippine market. competition. Section 3 exempts collective bargaining by employees CONDUCT but only in respect of conditions of employment. Since collective bargaining entails negotiating for uniform Conduct refers to any type or form of undertaking, collective conditions of employment for all or a segment of the recommendation, independent or concerted action or employees of a specific employer, an exception has to be practice, whether formal or informal. made otherwise, it may run afoul the prohibition against anti-competitive agreements. For this type of agreement, COMMISSION the Labor Code of the Philippines of the employees of a specific employer will apply. Commission refers to the Philippine Competition Commission created under this Act. DEFINITION OF TERMS CONFIDENTIAL BUSINESS INFORMATION ACQUISITION Confidential business information refers to information Acquisition refers to the purchase of securities or assets, which concerns or relates to the operations, production, through contract or other means, for the purpose of sales, shipments, purchases, transfers, identification of obtaining control by: customers, inventories, or amount or source of any income, 1. One (1) entity of the whole or part of profits, losses, expenditures. another; 2. Two (2) or more entities over another; or CONTROL 3. One (1) or more entities over one (1) or Control refers to the ability to substantially influence or more entities direct the actions or decisions of an entity, whether by contract, agency or otherwise. NOTE: It not only pertains to purchase of physical assets Presumption of Control such as plants, equipment, buildings, land, and the like, as Control is presumed to exist when an entity owns, directly well as intangible assets such as intellectual property right, or indirectly, more than 50 % of the voting power of an franchises, mining rights and the like. entity, unless it can clearly show that such ownership does AGREEMENT not constitute control. Agreement refers to any type or form of contract, Control may be deemed to exist even when an entity owns arrangement, understanding, collective recommendation, 50% or less of the voting power of another entity when: or concerted action, whether formal or informal, explicit or (1) There is power over than 50% of the voting rights tacit, written or oral. by virtue of an agreement with investors Examples of Agreement (2) There is power to direct or govern the financial and operating policies of the entity under a statue or 1. Collective Recommendation agreement. a. There must be intentional simultaneous acts by two or more undertakings  Competition Law Atty. Jared Rivera Keyboard Warriors |4 (3) There is power to appoint or remove the majority Market refers to the group of goods or services that are of the members of the board of directors or sufficiently interchangeable or substitutable and the object equivalent governing body of competition, and the geographic area where said goods (4) There is power to cast the majority votes at or services are offered. meetings of the board of directors or equivalent MERGER governing body. (5) There exists ownership over or the right to use all Merger refers to the joining of two (2) or more entities into or a significant part of the assets of the entity. an existing entity or to form a new entity. (6) There exist rights of contracts which confer decisive influence on the decisions of the entity. RELEVANT MARKET Relevant market refers to the market in which a "Control" vs "control test” used to determine the particular good or service is sold and which is a nationality of an entity combination of the relevant product market and the Control test Control relevant geographic market, defined as follows: Corporate control is Under Section 4(1), the (1) A relevant product market comprises exercised by virtue of essential factor is the all those goods and/or services which ownership, position in the ability to substantially are regarded as interchangeable or entity, a contractual influence or direct the arrangement, or a actions or decisions over substitutable by the consumer or the combination of any of another entity. Substantial customer, by reason of the goods and/or these. Corporate control influence may be services’ characteristics, their prices and management may be construed as the ability to and their intended use; and vested in the stockholders, control the strategic BOD, and officers, commercial behavior of the (2) The relevant geographic market depending on the entity concerned. The term comprises the area in which the entity corporate charter and "substantially" would concerned is involved in the supply and bylaws. Typically, however, appear to exclude the demand of goods and services, in which the corporate powers are residual stockholders' the conditions of competition are exercised by the BOD, and rights to vote on sufficiently homogenous and which can the stockholders reserve fundamental corporate be distinguished from neighboring the right to determine changes. areas because the conditions of fundamental changes in competition are different in those areas. the corporate structure. The relevant market is the market within which a given DOMINANT POSITION competition issue is assessed. Dominant position refers to a position of economic strength SSNIP Test that an entity or entities hold which makes it capable of The common test used for determining whether certain controlling the relevant market independently from any or goods or services belong to the same product market is the a combination of the following: competitors, customers, "hypothetical monopolist" or the "small but significant and suppliers, or consumers. non- transitory increase in price" ("SSNIP") test. The ENTITY common benchmark for a small but significant increase is 5% -10% and non-transitory means one to three years, Entity refers to any person, natural or juridical, sole depending on market type and conditions. proprietorship, partnership, combination or association in any form, whether incorporated or not, The SSNIP test is also used to identify the relevant domestic or foreign, including those owned or controlled geographic market. The relevant geographic market by the government, engaged directly or indirectly in any generally will be the smallest area that satisfies this test. economic activity. TATAD vs. THE SECRETARY OF THE DEPARTMENT OF MARKET ENERGY AND THE SECRETARY OF THE DEPARTMENT OF FINANCE G.R. No. 124360 November 5, 1997  Competition Law Atty. Jared Rivera Keyboard Warriors |5 FACTS: Several petitions were filed challenging the constitutionality of Republic Act No. 8180 entitled "An Act Deregulating the Downstream Oil Industry and For Other Purposes". Petitioner contends that the 3%-7% tariff differential unduly favors the three existing oil refineries and discriminates against prospective investors in the downstream oil industry who do not have their own refineries and will have to source refined petroleum products from abroad. Section 5(b) of R.A. No. 8180. Section 5(b) provides: b) Any law to the contrary notwithstanding and starting with the effectivity of this Act, tariff duty shall be imposed and collected on imported crude oil at the rate of three percent (3%) and imported refined petroleum products at the rate of seven percent (7%), except fuel oil and LPG, the rate for which shall be the same as that for imported crude oil: Provided, That beginning on January 1, 2004 the tariff rate on imported crude oil and refined petroleum products shall be the same: Provided, further, That this provision may be amended only by an Act of Congress. RULING: it cannot be denied that our downstream oil industry is operated and controlled by an oligopoly, a foreign oligopoly at that. Petron, Shell and Caltex stand as the only major league players in the oil market. All other players belong to the lilliputian league. As the dominant players, Petron, Shell and Caltex boast of existing refineries of various capacities. The tariff differential of 4% therefore works to their immense benefit. Yet, this is only one edge of the tariff differential. The other edge cuts and cuts deep in the heart of their competitors. It erects a high barrier to the entry of new players. New players that intend to equalize the market power of Petron, Shell and Caltex by building refineries of their own will have to spend billions of pesos. Those who will not build refineries but compete with them will suffer the huge disadvantage of increasing their product cost by 4%. They will be competing on an uneven field. The argument that the 4% tariff differential is desirable because it will induce prospective players to invest in refineries puts the cart before the horse. The first need is to attract new players and they cannot be attracted by burdening them with heavy disincentives. Without new players belonging to the league of Petron, Shell and Caltex, competition in our downstream oil industry is an idle dream. IN VIEW WHEREOF, the petitions are granted. R.A. No. 8180 is declared unconstitutional and E.O. No. 372 void.  Competition Law Atty. Jared Rivera Keyboard Warriors |6 CHAPTER II the competition authority the competition PHILIPPINE COMPETITION COMMISSION investigates and authority prosecutes the adjudicates the case. cases in court, which then adjudicates the Section 5. Philippine Competition Commission. – To case. implement the national competition policy and attain the objectives and purposes of this Act, an independent The PCC follows the administrative model. quasi-judicial body is hereby created, which shall be known as the Philippine Competition Commission (PCC), COMPOSITION hereinafter referred to as the Commission, and which shall be organized within sixty (60) days after the Section 6. Composition of the Commission. – The effectivity of this Act. Upon establishment of the Commission shall be composed of a Chairperson and four Commission, Executive Order No. 45 designating the (4) Commissioners. The Chairperson and the Department of Justice as the Competition Authority is Commissioners shall be citizens and residents of the hereby amended. The Office for Competition (OFC) under Philippines, of good moral character, of recognized the Office of the Secretary of Justice shall however be probity and independence and must have distinguished retained, with its powers and functions modified themselves professionally in public, civic or academic pursuant to Section 13 of this Chapter. service in any of the following fields: economics, law, finance, commerce or engineering. They must have been The Commission shall be an attached agency to the Office in the active practice of their professions for at least ten of the President. (10) years, and must not have been candidates for any elective national or local office in the immediately preceding elections, whether regular or special: PCC was constituted on February 1, 2016 Provided, That at least one (1) shall be a member of the The PCC is an administrative quasi-judicial body with Philippine Bar with at least ten (10) years of experience the power to adjudicate violations of the PCA and mete in the active practice of law, and at least one (1) shall be an economist. The Chairperson and the Commissioners out administrative penalties. who shall have the rank equivalent of cabinet secretary But the power to prosecute the criminal actions arising and undersecretary, respectively, shall be appointed by from violations of the PCA remains with the DOJ. the President. PCC is exempt from salary standardization law Composition The PCA provides various safeguards to ensure the independence of the PCC: 1 Chairperson 4 Commissioners 1. fixed term of the members of the Commission (Sec. at least one (1) shall be a member of the 7) Philippine Bar with at least ten (10) years of 2. prohibitions against holding any other office, experience in the active practice of law, and at least participating in any business, having financial one (1) shall be an economist interest in any government contract, franchise, Qualifications special privileges, and disqualification from running for the immediately succeeding election 1. citizens and residents of the Philippines, (Sec. 8) 2. of good moral character, 3. exemption from the salary standardization law 3. of recognized probity and independence and must (Sec. 9) have distinguished themselves professionally in 4. immunity from suit (Sec. 42) public, civic or academic service in any of the following fields: economics, law, finance, commerce 5. indemnity (Sec. 43); and or engineering. 6. prohibitions against issuance of temporary 4. They must have been in the active practice of their restraining orders, preliminary injunctions, and professions for at least ten (10) years, and preliminary mandatory injunctions (Sec. 47). 5. must not have been candidates for any elective national or local office in the immediately Administrative and Prosecutorial Models preceding elections, whether regular or special Administrative Model Prosecutorial Model  Competition Law Atty. Jared Rivera Keyboard Warriors |7 The Chairperson and the Commissioners who shall have the No spouse or relative by consanguinity or affinity within the rank equivalent of cabinet secretary and undersecretary, fourth civil degree of any of the Commissioners, the respectively, shall be appointed by the President. Chairperson and the Executive Director of the Commission may appear as counsel nor agent on any matter pending TERM OF OFFICE before the Commission or transact business directly or indirectly therein during incumbency and within two (2) Section 7. Term of Office. – The term of office of the years from cessation of office. Chairperson and the Commissioners shall be seven (7) years without reappointment. Of the first set of appointees, The Commissioners shall not, during their tenure: the Chairperson shall hold office for seven (7) years and of hold any other office or employment. the first four (4) Commissioners, two (2) shall hold office for a term of seven (7) years and two (2) for a term of five (5) GR: They shall not, during their tenure, directly or years. In case a vacancy occurs before the expiration of the indirectly practice any profession term of office, the appointment to such vacancy shall only be for the unexpired term of the predecessor. XPN: in a teaching capacity, The Chairperson and the Commissioners shall enjoy security of tenure and shall not be suspended or removed participate in any business, or be financially from office except for just cause as provided by law. interested in any contract with, or any franchise, or special privileges granted by the government or The term of office of the Chairperson and the any subdivision, agency, or instrumentality thereof, Commissioners shall be seven (7) years without including government-owned and -controlled reappointment. corporations or their subsidiaries. In case a vacancy occurs before the expiration of the term of office, the appointment to such vacancy They shall strictly avoid conflict of interest in the shall only be for the unexpired term of the conduct of their office. predecessor. The Chairperson and the Commissioners shall They shall not be qualified to run for any office in enjoy security of tenure. the election immediately succeeding their They shall not be suspended or removed from cessation from office. office except for just cause as provided by law. o The election is NOT a Barangay election or a PROHIBITIONS AND DISQUALIFICATIONS Sangguniang Kabataan election. o "Election" refers to local and national elections. Section 8. Prohibitions and Disqualifications. – The Commissioners shall not, during their tenure, hold any They shall not be allowed to personally appear or other office or employment. They shall not, during their practice as counsel or agent on any matter pending tenure, directly or indirectly practice any profession, except before the Commission for two (2) years following in a teaching capacity, participate in any business, or be their cessation from office. financially interested in any contract with, or any franchise, or special privileges granted by the government or any o The two-year bar extends to spouses or subdivision, agency, or instrumentality thereof, including relatives by consanguinity or affinity government-owned and -controlled corporations or their within the fourth civil degree of the subsidiaries. They shall strictly avoid conflict of interest in members of the Commission and the the conduct of their office. They shall not be qualified to run Executive Director. for any office in the election immediately succeeding their cessation from office: Provided, That the election o The bar does not apply only to lawyers but mentioned hereof is not a Barangay election or a to all members of the Commission. Sangguniang Kabataan election. Provided, they shall not be allowed to personally appear or practice as counsel or agent o A former member of the Commission on any matter pending before the Commission for two (2) cannot appear whether for or against the years following their cessation from office. Commission in any investigation or  Competition Law Atty. Jared Rivera Keyboard Warriors |8 adjudicative proceeding before the vote of three (3) members shall be necessary for the Commission. adoption of any rule, ruling, order, resolution, decision or other acts of the Commission. o The bar is not limited to physical appearance before the Commission. A The Commission is a collegial body composed of a former member also cannot sign pleadings chairman and four commissioners. filed with the Commission. The presence of three members shall constitute a o The bar applies only to the member quorum and the affirmative vote of three members concerned and does not extend to the law is necessary to carry any ruling, decision, or act of firm of which he/she may become a part the Commission. after leaving the Commission. The quorum and votes required remain the same No spouse or relative by consanguinity or regardless of the number of sitting members of the affinity within the fourth civil degree of any of Commission. Thus, even where there is a vacancy, the Commissioners, the Chairperson and the the Commission needs the presence of at least Executive Director of the Commission may appear three members to constitute a quorum and must as counsel nor agent on any matter pending have three affirmative votes. before the Commission or transact business STAFF directly or indirectly therein during incumbency AND within two (2) years from cessation of office. Section 11. Staff. – The Commission shall appoint, fix the COMPENSATION AND OTHER EMOLUMENTS FOR compensation, and determine the status, qualifications, and MENBERS AND PERSONNEL OF THE COMMISSION duties of an adequate staff, which shall include an Executive Director of the Commission. The Executive Director shall be appointed by the Commission and shall have relevant Section 9. Compensation and Other Emoluments for experience in any of the fields of law, economics, commerce, Members and Personnel of the Commission.— The management, finance or engineering for at least ten (10) compensation and other emoluments for the members and years. The members of the technical staff, except those personnel of the Commission shall be exempted from the performing purely clerical functions, shall possess at least a coverage of Republic Act No. 6758, otherwise known as the Bachelor’s Degree in any of the following lines of "Salary Standardization Act". For this purpose, the salaries specialization: economics, law, finance, commerce, and other emoluments of the Chairperson, the engineering, accounting, or management. Commissioners, and personnel of the Commission shall be Executive Director set based on an objective classification system, taking into consideration the importance and responsibilities attached 1. appointed by the Commission to the respective positions, and shall be submitted to the 2. have relevant experience in any of the fields of President of the Philippines for his approval. law, economics, commerce, management, finance or engineering for at least ten (10) Section 9 exempts the Commission members and staff from years. the Salary Standardization Act to allow flexibility to structure salary packages that can compete with the private The Executive Director has administrative supervision sector in attracting highly competent individuals. At the over the following offices: same time, it is a measure to prevent regulatory capture. Since the Commission is attached to the Office of the 1. Mergers and Acquisition Office ("MAO") - President, the salary structure shall be approved by the reviews and investigates mergers and acquisitions President. as provided in Sections 16-21 2. Competition Enforcement Office ("CEO") QUORUM investigates and prosecutes violations of Sections 14 and 15 3. Economics Office provides economic analysis in Section 10. Quorum. – Three (3) members of the merger and enforcement cases; conducts market Commission shall constitute a quorum and the affirmative studies  Competition Law Atty. Jared Rivera Keyboard Warriors |9 4. Communications and Knowledge Management Office - leads the advocacy functions of the PCC 5. Finance and Administration - provides financial and administrative support. Members of the Technical Staff GR: They shall possess at least a Bachelor’s Degree in any of the following lines of specialization: economics, law, finance, commerce, engineering, accounting, or management. XPN: those performing purely clerical functions,  Competition Law Atty. Jared Rivera K e y b o a r d W a r r i o r s | 10 SECTION 12 c. Undertake inspections of business premises and POWERS AND FUNCTIONS other offices (12[g]) d. Deputize enforcement agencies or enlist the aid of This section grants both original and primary jurisdiction to private institutions in the implementation of the PCC over the enforcement and implementation of the powers and functions (12); and provisions of the PCA and its IRRS. This means that the e. Monitor compliance with cease and desist order or jurisdiction to hear for the first time any case arising from a consent judgment violation of the PCA belongs to the PCC. The grant of primary jurisdiction to the PCC recognizes that the PCC is the agency with the relevant subject matter expertise. For merger control, Section 12(b) gives the PCC the power to review proposed mergers and acquisitions, determine The power to prosecute the criminal actions arising from thresholds, requirements, and procedures, and prohibit violations of the PCA remains with the DOJ. mergers and acquisitions that will substantially prevent, Original jurisdiction is the authority to take cognizance of restrict, or lessen competition in the relevant market. a case at the first instance. The PCC's powers relating to adjudication are the Doctrine of primary jurisdiction following: If a case is such that its determination requires the a. Hear and decide on violations of the PCA and other expertise, specialized training and knowledge of an existing competition laws (12[a]) administrative body, relief must first be obtained in an b. Conduct administrative proceedings, impose fines, administrative proceeding before resort to the courts is had sanctions, and penalties for any non-compliance or even if the matter may be within the court's proper breach of the PCA, and punish for contempt (12[e]); jurisdiction. c. Upon finding based on substantial evidence, that an entity has entered into an anti-competitive The original and primary jurisdiction granted to the PCC agreement or abused its dominant position, after thus means that it has the authority to decide on cases due notice and hearing, apply remedies, such as, under the PCA and its IRR which are filed at the first instance, and it enjoys a preference in the exercise of this but not limited to, issuance of injunctions, authority over courts or other bodies having concurrent requirement of divestment, and disgorgement of original jurisdiction. excess profits (12[d]); and d. Issue adjustment or divestiture orders including The powers and functions of the PCC under Section 12 orders for corporate reorganization (12[h]). may be categorized as follows: 1. Investigative and prosecutorial powers The PCC's powers relating to policy advocacy and 2. Merger control advisory are the following: 3. Adjudication 4. Policy advisory and advocacy a. Issue advisory opinions and guidelines on 5. Market surveillance competition matters 6. Administrative b. Intervene or participate in administrative and regulatory proceedings requiring consideration of the provisions of the PCA (12[n]); The PCC's powers relating to investigation and c. Assist NEDA in the formulation of a national prosecution of cases are the following: competition policy a. Conduct inquiry, investigate violations of the PCA d. Advocate pro-competitive policies of the and other existing competition laws, motu proprio, government (12[r]) or upon receipt of a verified complaint, or a referral e. Conduct, publish, and disseminate studies and from a regulatory agency (12[a]) reports on anti- competitive conduct and b. Issue subpoena to require the production of data, agreements to inform and guide the industry and summon witnesses, issue interim orders such as consumers (12[m]) show cause orders and cease and desist orders f. Act as the official representative of the Philippine after due notice and hearing (12[f]) government in international competition matters (12[p]); and  Competition Law Atty. Jared Rivera K e y b o a r d W a r r i o r s | 11 g. Promote capacity building and the sharing of best The PCC cannot impose criminal sanctions but only practices with other competition-related bodies administrative fines and penalties. (12[q]). See discussion under “Power of Adjudication.” Issue interim orders such as show cause orders and The PCC's powers relating to market surveillance are the cease and desist orders after due notice and hearing. following: a. Monitor and undertake consultation with (f) Issue subpoena duces tecum and subpoena ad stakeholders and agencies for purpose of testificandum to require the production of books, records, understanding market behavior (12[c]); and or other documents or data which relate to any matter b. Monitor or analyze the practice of competition in relevant to the investigation and personal appearance markets affecting Philippine economy (12). before the Commission, summon witnesses, administer oaths, and issue interim orders such as show cause orders and cease and desist orders after due notice and hearing in As a government agency, the PCC also exercises accordance with the rules and regulations implementing administrative functions. In relation to this, Section 12(s) this Act. allows the PCC to charge reasonable fees to defray the administrative costs of conducting merger reviews. The PCC has authority to punish for contempt any entity that willfully fails to comply with such Particular Powers Discussed processes, and to impose an administrative fine on any entity that fails to comply with an order of the Power to Investigate Commission. (a) Conduct inquiry, investigate, and hear and decide on These powers may be exercised by the PCC on its cases involving any violation of this Act and other existing own, without need of going to court. competition laws motu proprio or upon receipt of a verified complaint from an interested party or upon In enforcement proceedings … referral by the concerned regulatory agency, and institute The Commission may, on its own or upon application by a the appropriate civil or criminal proceedings respondent or the CEO, impose interim measures: The PCC's power to investigate includes violations not only 1. order the temporary cessation of or desistance of the PCA but also other competition-related laws. from the performance of certain acts, the continued performance of which would result Section 12 (d) in a material and adverse effect on consumers or competition in the relevant market/s; and (d) Upon finding, based on substantial evidence, that an 2. impose other interim measures to protect the entity has entered into an anti-competitive agreement or has abused its dominant position after due notice and integrity of the investigatory or adjudicatory hearing, stop or redress the same, by applying remedies, process, or where there is an urgent need to such as, but not limited to, issuance of injunctions, prevent harm to competition. requirement of divestment, and disgorgement of excess profits under such reasonable parameters that shall be In merger review proceedings … prescribed by the rules and regulations implementing The interim measures may include ordering a party, its this Act. subsidiaries or affiliates, their respective directors, officers, agents or employees, to temporarily cease or desist from the See discussion under “Power of Adjudication.” performance of certain acts such as: Section 12 (e) 1. prohibiting a party from performing acts of consummation of a merger; (e) Conduct administrative proceedings, impose sanctions, 2. prohibiting the layoff of certain staff members fines or penalties for any noncompliance with or breach of or limiting exchange of commercially sensitive this Act and its implementing rules and regulations (IRR) information; or and punish for contempt. 3. ordering preservation of documents including computer memory, computer disks, data compilations, e-mail messages sent and  Competition Law Atty. Jared Rivera K e y b o a r d W a r r i o r s | 12 received and all back-up computer files or The application shall be verified and shall contain a devices. particular description of: Power to Inspect; Dawn Raids (1) the subject of the administrative investigation; (2) the premises, other offices, land or vehicles, as used by the entity, sought to be searched or (g) Upon order of the court, undertake inspections of inspected; and business premises and other offices, land and vehicles, as (3) the information sought to be examined, copied, used by the entity, where it reasonably suspects that photographed, recorded, or printed, and their relevant books, tax records, or other documents which relevance and necessity to the investigation. relate to any matter relevant to the investigation are kept, in order to prevent the removal, concealment, tampering with, The court shall act upon the application within or destruction of the books, records, or other documents twenty-four (24) hours. Dawn raid The hearing on the application for the inspection order shall be conducted ex parte and held in the An unannounced search of business premises of entities chambers of the judge. subject of an investigation. What is the legal standard for the issuance of an NOTE: It requires a court order for the exercise of such inspection order? power. The legal standard for the issuance of an inspection order Where to apply for inspection orders? is "reasonable suspicion that relevant books, tax records, or other documents which relate to any matter relevant In A.M. No. 19-08-06-SC which took effect on January 1, to the investigation are kept in the business premises and 2020, the Supreme Court designated Special Commercial other offices, land and vehicles." Thus, an inspection Courts as competition courts to hear, try, and decide cases order shall be issued if the court finds that there is a involving violations of the PCA and other competition laws. reasonable ground to suspect: Thus, applications for inspection orders shall be filed with these courts. 1. that the information is kept, found, stored, or accessible at the premises indicated in the Special Commercial Courts in Quezon City, City of Manila, application; Makati City, Pasig City, Cebu City, Iloilo City, Davao City, 2. the information relates to any matter relevant to and Cagayan de Oro City shall have jurisdiction to issue the investigation; and inspection orders enforceable nationwide. 3. the issuance of the order is necessary to prevent the removal, concealment, tampering with, or The Special Commercial Courts in the judicial regions where destruction of the books, records, or other the place to be inspected is located shall have concurrent documents to be inspected. jurisdiction. What is the duration of an inspection order? What is an inspection order? The court shall determine the duration of effectivity of an An "inspection order" is an order in writing issued in the inspection order, which shall not exceed fourteen (14) name of the Republic of the Philippines, signed by a judge, days, subject to extension for a similar period upon upon application of the PCC, through its duly authorized motion ex parte by the PCC. officer, authorizing the PCC and any law enforcement agency that may be deputized by the PCC to assist in the execution How is an inspection order carried out? of the order, to search and inspect business premises and other offices, land and vehicles, for information to be 1. The order shall be served in the presence of a examined, copied, photographed, recorded, or printed, in duly designated officer of the court AND a order to prevent the removal, concealment, tampering with, person designated by the entity, who shall or destruction of such information. either be a compliance officer or a legal counsel. What are the contents of an application for 2. This is to be done during business hours, OR at inspection order? any time on any day, as may be determined by  Competition Law Atty. Jared Rivera K e y b o a r d W a r r i o r s | 13 the court for compelling reasons stated in the If a dominant player is proven to have committed predatory application. pricing as well as engaged in smuggling activities, or in misdeclaring taxes, the entity would be liable for violation After the conduct of the inspection, the PCC shall file a of all the laws applicable under the circumstances. In this return with the issuing court. situation, the Bureau of Internal Revenue (BIR) would have jurisdiction to investigate the tax violation and the PCC can Competition authorities are generally empowered to invoke its power to deputize BIR for the investigation of perform the following during a dawn raid: predatory pricing. 1. enter premises, including land and vehicles, of Power to monitor compliance entities subject of the investigation; 2. examine their books and other records related to their business; (j) Monitor compliance by the person or entities concerned 3. take or obtain, in any form, copies of extracts from with the cease and desist order or consent judgment. such books or records; The Commission has the power to issue cease and desist 4. seal any business premises, books or records for orders and consent judgments and to monitor the the period necessary for the inspection; and compliance of entities with such order or judgment. 5. ask any representative of the entities for explanations on facts or documents relating to the For consent orders, one of the requisite conditions is the subject of the inspection and to record their submission of compliance reports indicating an entity's answers. continuing compliance with its commitments. Thus, the Commission has the power to monitor such What is the consequence of failure to comply with an compliance and impose penalties for non-compliance. inspection order? Issue advisory opinions and guidelines on competition Failure or refusal to comply with the inspection order or matters any provision of the RASI shall be punishable with contempt of court under Rule 71 of the Rules of Court. (k) Issue advisory opinions and guidelines on competition matters for the effective enforcement of this Act and submit What is the remedy of an entity whose premises were annual and special reports to Congress, including proposed inspected against the inspection order? legislation for the regulation of commerce, trade, or industry. Before a return has been filed, the person or entity whose premises were inspected may file a written Example: motion with the issuing court to quash the inspection order on the ground that it was improperly issued or If the Land Transportation Franchising Regulatory Board implemented. The motion shall be resolved in a (LTFRB) is being accused of having impeded competition by summary hearing after due notice to the PCC. making it appear that the carrying capacity in a given area has already reached the allowable limit because of too many Section 12(i): Deputize any and all enforcement franchises, can PCC take action against LTFRB? agencies of the government or enlist the aid and support of any private institution. The PCC could not technically file charges against government entities like the LTFRB. It could instead (i) Deputize any and all enforcement agencies of the submit a legal opinion to the Department of government or enlist the aid and support of any private Transportation, to which LTFRB is attached, for the institution, corporation, entity or association, in the amendment of certain policies or for the promotion of implementation of its powers and functions. competition and, ultimately, elevate the issue to the Office of the President. The PCC could be allowed to deputize but only with respect to the competition aspect. The PCC's opinion in such a case would only be persuasive but not mandatory. Example: Government entities could only be impleaded in case of collusion or where there is bribery involved.  Competition Law Atty. Jared Rivera K e y b o a r d W a r r i o r s | 14 Power to Adjudicate Substantial evidence is "such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion." (d) Upon finding, based on substantial evidence, that an entity has entered into an anti-competitive agreement or has abused its dominant position after due notice and Structural and Behavioral Remedies hearing, stop or redress the same, by applying remedies, such as, but not limited to, issuance of injunctions, (h) Issue adjustment or divestiture orders including requirement of divestment, and disgorgement of excess orders for corporate reorganization or divestment in the profits under such reasonable parameters that shall be manner and under such terms and conditions as may be prescribed by the rules and regulations implementing prescribed in the rules and regulations implementing this Act; this Act. Adjustment or divestiture orders, which are structural remedies, should only be imposed: (e) Conduct administrative proceedings, impose sanctions, fines or penalties for any noncompliance with 1. Where there is no equally effective or breach of this Act and its implementing rules and behavioral remedy; or regulations (IRR) and punish for contempt; 2. Where any equally effective behavioral remedy would be more burdensome for the (h) Issue adjustment or divestiture orders including enterprise concerned than the structural orders for corporate reorganization or divestment in the remedy. Changes to the structure of an manner and under such terms and conditions as may be enterprise as it existed before the prescribed in the rules and regulations implementing infringement was committed would only be this Act. Adjustment or divestiture orders, which are proportionate to the substantial risk of a structural remedies, should only be imposed: lasting or repeated infringement that derives from the very structure of the (1) Where there is no equally effective behavioral enterprise; remedy; or (2) Where any equally effective behavioral remedy would There are two types of remedies to address competition be more burdensome for the enterprise concerned than concerns: the structural remedy. Changes to the structure of an enterprise as it existed before the infringement was 1. Structural; and committed would only be proportionate to the 2. behavioral. substantial risk of a lasting or repeated infringement that derives from the very structure of the enterprise; Structural remedies are measures that directly alter the market structure and address issues that give rise to competition problems. These are characterized as a one-off NOTE: On the imposition of remedies, there is a preference measure that intends to restore the competitive structure of for behavioral remedies before resorting to the structural the market. remedy of divestiture. Examples: The phrase "such as but not limited to" in Section 12(d) indicates that the remedies mentioned are only examples, divestitures (Le, forced sale of business units or and the PCC is not precluded from employing other assets, either in full or part), remedies that may address the competition issue. licensing (l.e., compulsory licensing of legal rights, usually intellectual property rights), What is the standard of proof required in the rescission (ie., undoing a completed transaction), proceedings before the PCC? and dissolution (ie., ending a legal entity). Considering that the proceedings before the PCC are Behavioral remedies are measures that directly alter the administrative in nature, the standard of proof required is behavior of an entity. In contrast to the "one-off" substantial evidence. The general test for finding whether characteristic of structural remedies, behavioral remedies a certain agreement, conduct, or merger or acquisition create an ongoing relationship between a firm and a violates the PCA is if it has the object or effect of regulator or with other firms because of the continuing substantially preventing, restricting, or lessening monitoring required. competition.  Competition Law Atty. Jared Rivera K e y b o a r d W a r r i o r s | 15 Example: extending fair, reasonable, and non- anti-competitive agreements and abuse of discriminatory terms to competitors. dominance cases. NOTE: Structural remedies will be resorted to only when Disgorgement can cover both excess profits as well there is no equally effective behavioral remedy, or such as any other form of benefit or gain reasonably would be more burdensome. connected to any violation of the PCA or its IRR. Principle of Proportionality Advocacy and Advisory Functions It requires that measures adopted do not exceed the limits of what is appropriate and necessary in order to attain the The PCC may: legitimate objectives. When there is a choice between issue advisory opinions to government agencies, several appropriate measures, recourse must be had to the intervene in administrative and regulatory least onerous one, and the disadvantages caused must not proceedings, and give its position on intended be disproportionate to the aims pursued. regulations that may have an impact on competition. Applying the principle of proportionality to competition remedies, the nature and scope of the remedy imposed by intervene in the administrative proceedings of the the competition authority should fit the competition law problem identified and the theory of harm relied upon. SEC, the ERC, and the NTC Thus, Section 12(h) provides that changes to the structure may review regulations either on a motu proprio of an enterprise as it existed before the infringement was basis or upon request and advise the Executive on committed should only be proportionate to the substantial potential effects on competition of government risk of a lasting or repeated infringement that arises from actions and policies. the very structure of the enterprise. In line with this, the PCC is also tasked to assist Divestiture NEDA in the formulation of a competition policy. A divestiture remedy requires an entity to sell off an autonomous, operational business unit with the capacity to may comment on bills with possible impact on compete in the relevant market. competition This remedy is usually relevant in merger reviews assess the competition landscape in various sectors where a merger is deemed likely to result in a and provide guidance on business conduct. substantial lessening of competition in the relevant market. The Commission has the power to require divestiture as a condition for clearing the merger. The PCC also submits and publishes annual reports containing its accomplishments and activities for the year The PCC Rules of Procedure provide for the as well as the priorities for the succeeding year. imposition of divestiture where there is no equally Section 12(p) expressly designates the PCC as the effective behavioral remedy or where such would government's official representative in the international be more burdensome for the enterprise concerned. sphere when it comes to competition matters. The divested asset usually takes the form of the Market Surveillance acquiring entity's existing business that competes with the acquired firm's business. The PCC is mandated to keep itself abreast of developments in the market which impact competition. This also ensures Disgorgement that the PCC understands stakeholder perspectives, including that of business, so that PCC's implementation of Disgorgement, or "gain-based damages," is an equitable the law is relevant and based on empirical evidence. remedy where an infringer is required to give back the unlawful profits gained from its unlawful behavior. SECTION 13 Section 12(d) authorizes the Commission to apply OFFICE FOR COMPETITION (OFC), POWERS AND the remedy of disgorgement of excess profits in FUNCTIONS  Competition Law Atty. Jared Rivera K e y b o a r d W a r r i o r s | 16 Section 13. Office for Competition (OFC), Powers and Functions. — The OFC under the Department of Justice (DOJ-OFC) shall only conduct preliminary investigation and undertake prosecution of all criminal offenses arising under this Act and other competition-related laws in accordance with Section 31 of Chapter VI of this Act. The OFC shall be reorganized and allocated resources as may be required therefor to effectively pursue such mandate. The PCC and the DOJ entered into a Memorandum of Agreement (MOA) which sets forth the referral system and procedure for conducting preliminary investigations of criminal offenses covered by the PCA. The MOA provides that preliminary investigation of such offenses will only be commenced by the DOJ upon the filing of a criminal complaint by the PCC. Criminal information For the purpose of filing an information, every agreement, or each and every violation in an anti-competitive agreement, whether implemented or not, shall be considered as one distinct offense. Regardless of the penalties and fines imposed, the information shall be filed in the RTC of the city or province where the entity or any of the entities whose business act or conduct constitutes the subject matter of a case, conducts its principal place of business. Information against an accused charged in the capacity of a director, officer, shareholder, employee, or agent of a corporation or other juridical entity who knowingly and willfully authorized the commission of the offense shall be filed in the Regional Trial Court of the city or province where such corporation or juridical entity conducts its principal place of business.  Competition Law Atty. Jared Rivera K e y b o a r d W a r r i o r s | 17 CHAPTER III PROHIBITED ACTS Anticompetitive agreements that fall under the third category (i.e., those that are not cartels) to the “efficiency defense,” i.e., an agreement will 1. Anti-competitive agreements not necessarily be in violation of the PCA if it 2. Abuse of dominant position “contributes to improving the production or distribution of goods and services or to SECTION 14 promoting technical or economic progress, ANTI-COMPETITIVE AGREEMENTS while allowing consumers a fair share of Three categories of anticompetitive agreements under the resulting benefits.” Section 14 of the PCA: NOTE: The first two categories are found in Section 14(a) (1) “per se prohibited” agreements between or and (b) and pertain to anticompetitive agreements between among competitors or among competitors. These are commonly known as ‘hardcore cartels’ and considered the most serious Anticompetitive restraints that are illegal per se breaches of competition law. Also referred to as "horizontal are those that are so inherently anticompetitive agreements,” these are agreements between entities that and damaging to the market that they warrant operate at the same level of the production or distribution condemnation and are conclusively presumed to chain. be anticompetitive without any need to consider Per se prohibited Anticompetitive their effects in practice or the existence of any agreements Section 14 Agreements under 14 objective justification. These agreements are (a) (b) and (c) conclusively presumed to substantially prevent, Conclusively presumed to “injury to the market” must restrict, or lessen competition without having to be anticompetitive be established and this prove their object or effect. All that is required regardless of the intent or injury must be to be proven is that the specific anticompetitive motive of the parties “substantial” This agreement was reached for it to be punished generally requires the under this section. regulator to establish that either the object or the effect is to substantially These agreements are subject to the “rule of lessen competition in the reason” test. relevant market. (2) agreements between or among competitors that have the “object or effect” of Penalties Applicable to Violations of Article 14 substantially preventing, restricting, or lessening competition. Article 14 (a) and (6) – criminal penalty (ie., imprisonment, fine or both) Cartels under Section 14(b) are subject to the Article 14 (a), (b), and (c) – administrative penalty “object or effect analysis.” APPLICATION TO GOVERNMENT ENTITES AND (3) those specified in Section 14(a) and (b), OFFICIALS which have the object or effect of substantially preventing, restricting, or GR: Not applicable to government entities; but only to lessening competition. private entities and GOCCs A government official who facilitated the false win in the This third category covers vertical bidding would he charged as an accomplice. anticompetitive agreements and other anticompetitive horizontal agreements that are Local executive or a government official would be not expressly enumerated under Section 14(a) considered jointly and severally liable as the private sector and (b). Vertical agreements are those partner in violating the PCA's provisions, which impose agreements between entities that operate at administrative fines when collusions or conspiracy is different levels of the production or distribution proven. chain.  Competition Law Atty. Jared Rivera K e y b o a r d W a r r i o r s | 18 XPN: The entire government agency will not be impleaded (1) The conduct contributes to improving the in the charge, unless it can be proven that the whole agency production or distribution of goods and services was an accomplice. or to promoting technical or economic progress; and FIRST CATEGORY: PER SE VIOLATIONS (2) The conduct allows consumers a fair share of the resulting benefits. (1) Price Fixing NOTE: This exemption does not apply to horizontal Restricting competition as to price, or agreements between competitors. components thereof, or other terms of trade; Single Economic Entity Doctrine (2) Bid Rigging An entity that controls, is controlled by, or is under common control with another entity or entities, have common Fixing price at an auction or in any form of economic interests, and are not otherwise able to decide or bidding including cover bidding, bid act independently of each other, shall not be considered suppression, bid rotation and market allocation competitors. and other analogous practices of bid manipulation Three Elements of Anti-competitive Agreements SECOND CATEGORY: SECTION 14 (B) 1. There are two or more separate entities; 2. The entities enter into some form of an agreement; (1) Output Restriction and 3. The agreement is anticompetitive per se or has the Setting, limiting, or controlling production, object or effect of substantially preventing, markets, technical development, or investment restricting, or lessening competition. (2) Market Allocation 1st element Dividing or sharing the market, whether by Entity - refers to any person, natural or juridical, sole volume of sales or purchases, territory, type of proprietorship, partnership, combination or association in goods or services, buyers or sellers or any other any form, whether incorporated or not, domestic or foreign, means; including those owned or controlled by the government, engaged directly or indirectly in any economic activity. They are not per se prohibited and will be be subject to the SLC test, i.e., violations of this provision will be evaluated on Section 14 provides that entities that are under common a case-by-case basis and may be prohibited if it is control or which have common economic interests and are established that they have the object and effect of not able to decide or act independently of each other, shall substantially preventing, restricting, or lessening not be considered as competitors. Such entities would competition. therefore not be considered separate entities but forming a single economic unit. Thus, an "entity" for purposes of THIRD CATEGORY: SECTION 14 (C) Section 14 must be understood as designating an economic unit, even if that economic unit consists of several persons, Agreements other than those specified in (a) and (b) of this natural or juridical. This means that entities that are part of section which have the object or effect of substantially a single economic unit cannot enter into an anticompetitive preventing, restricting or lessening competition shall also agreement with each other, whether horizontal or vertical. be prohibited: Thus, for Section 14 violations, unity of conduct on the Efficiency Defense market as between a parent company and its subsidiaries overrides the formal separation between those companies Those which contribute to improving the production or resulting from their separate legal personality. distribution of goods and services or to promoting technical or economic progress, while allowing consumers a fair 2nd Element: Agreement share of the resulting benefits, may not necessarily be deemed a violation of the PCA. Agreement refers to any type or form of contract, arrangement, understanding, collective recommendation, Elements:  Competition Law Atty. Jared Rivera K e y b o a r d W a r r i o r s | 19 or concerted action, whether formal or informal, explicit or behavior is also referred to as "tacit collusion" or tacit, written or oral. "conscious parallelism.” The term is not limited to formal agreements or (4) Information exchange contracts. An agreement does not need to be legally The exchange of commercially sensitive information enforceable to breach Section 14. (directly or indirectly) may give rise to a concerted practice, where the exchange reduces normal competitive market Examples: conditions. Separate economic operators must determine market conduct independently. (1) The following may be considered anticompetitive agreements: The exchange of commercially sensitive information carries (2) A gentleman’s agreement anticompetitive risks as it allows competitors to coordinate (3) An informal anticompetitive agreement their strategies, using the same pricing or cost information contributing a formal distribution agreement. with a collusive effect. (4) Agreements that have been formally terminated. if the parties continue to adhere to the terms of Commercially sensitive information generally includes the agreement price related. market-sensitive, and strategic commercial information, and other business information. NOTE: Cheating by one party does not negate the existence of the agreement itself. The exchange of information between competitors may violate the PCA if it reduces or removes the degree of (1) Collective Recommendation uncertainty as to the operation of the market in question, with the result that competitions between entities is It exists where: restricted. (1) there are intentional simultaneous acts by two Types of Agreements or more undertakings, (2) the recommendation is intended to align (1) Horizontal actions, and (3) the conduct has sufficient capacity to influence Horizontal agreements are agreements between the market. entities that operate at the same level of the production or distribution chain. Horizontal agreements may be (2) Concerted Action between actual or potential competitors. It has been interpreted as a form of coordination between To be considered as a potential competitor, an entity entities which, without having reached the stage where an must be able to enter the relevant market within a short agreement properly so called has been concluded, period of time, in response to a price increase. knowingly substitutes practical cooperation between them The anticompetitive risk in a horizontal agreement may for the risks of competition. be illustrated in the context of cooperation agreements To establish concerted practice, there is a requirement for between competitors (e.g., joint research and some knowingly (intentional or deliberate) coordinated development agreement, joint production agreements, limitation of competition. joint purchasing agreements, and joint commercialization). The concept of a concerted practice requires: (2) Vertical (1) concertation between the entities, subsequent conduct on the market, and Vertical agreements are agreements between entities (2) a relationship of cause and effect between the that operate at different levels of the production or two. distribution chain. (3) Hub and spokes arrangements (3) Parallel Behavior A combination of horizontal and vertical agreements is An example is raising prices or reducing output the hub and spoke arrangement. Hub and spoke simultaneously, which raises a suspicion that these arrangements are "horizontal restrictions on the activities are coordinated in some manner. This parallel supplier or retailer level (the 'spokes'), which are  Competition Law Atty. Jared Rivera K e y b o a r d W a r r i o r s | 20 implemented through vertically related players that conspirators know will be unacceptable to the serve as a common hub (e.g., a common manufacturer, party or agency calling for the bids retailer, or service provider). The hub facilitates the coordination of competition between the 'spokes' (3) Bid rotation, bidders take turns being the without direct contacts between the spokes. In the designated successful bidder. extreme, the effects of a horizontal hardcore cartel can be achieved purely based on indirect communication (4) Bid allocation, Le, bidders allocate or apportion between the horizontally aligned members of a hub and markets, products, customers, or geographic spoke arrangement. territories among themselves. This is then divided up such that each will get a "fair share of the total 3rd Element: Agreement is anticompetitive. business without having to truly compete with the others for the business Restraints that are illegal per se are those that are so inherently anticompetitive and damaging to the market that (5) Coordinating consortium membership they warrant condemnation and are conclusively presumed (6) Colluding with the body awarding the contract to to be anticompetitive without any need to consider their affect outcome. effects in practice or the existence of any objective (7) Using shared constants/advisers as information justification. Thus, what is only required to be proven is the channels existence of the specific anticompetitive agreement. The following may be considered as indications of bid- Horizontal Agreements that are Prohibited Per Se rigging: The PCA prohibits price fixing and bid rigging per se, also Suppliers appear to be taking turns at winning known as hardcore cartels. tenders. (1) Price fixing Regular suppliers decline to tender for no obvious reason. Bidders appear to deliberately include The term "