Philippine Competition Law: Ensuring Fair Business Practices

The Philippine Competition Act (Republic Act No. 10667) aims to promote fair competition in the market, enhance economic efficiency, and protect consumer welfare by prohibiting anti-competitive agreements, abuse of dominant position, and anti-competitive mergers and acquisitions. Ensuring compliance with this law is crucial for businesses to avoid legal penalties and maintain a fair market environment. This guide provides an overview of the key aspects of the Philippine Competition Act and how businesses can ensure compliance.

Key Provisions of the Philippine Competition Act

1. Anti-Competitive Agreements

Definition: Agreements between or among competitors that restrict, prevent, or lessen competition. Prohibited Agreements:

• Price Fixing: Agreements to fix prices, rig bids, or manipulate the supply of goods and services.
• Market Allocation: Agreements to divide or allocate markets, whether by geographic area, customer, or product type.
• Output Restriction: Agreements to limit or control production, markets, or investment.

Actions for Compliance:

• Avoid discussions or agreements with competitors regarding pricing, market division, or production limits.
• Establish internal policies to prevent anti-competitive agreements and provide training to employees.

2. Abuse of Dominant Position

Definition: Conduct by one or more firms in a dominant position that substantially prevents, restricts, or lessens competition. Examples of Abuse:

• Predatory Pricing: Selling goods or services below cost to eliminate competitors.
• Exclusive Dealing: Requiring customers or suppliers to deal exclusively with one firm.
• Refusal to Deal: Refusing to supply goods or services to certain customers or competitors without legitimate business justification.
• Tying and Bundling: Forcing customers to buy a product as a condition for purchasing another product.

Actions for Compliance:

• Monitor and assess business practices to ensure they do not unfairly restrict competition.
• Seek legal advice when engaging in pricing strategies, exclusive agreements, or other practices that could be perceived as abusive.

3. Merger and Acquisition Control

Definition: Regulations on mergers and acquisitions that may substantially prevent, restrict, or lessen competition. Thresholds for Notification:

• The transaction value exceeds PHP 2.4 billion (as of 2021, subject to annual adjustments).
• The aggregate annual gross revenues or value of assets in the Philippines of the acquiring and acquired entities exceed PHP 6 billion (as of 2021, subject to annual adjustments).

Actions for Compliance:

• Notify the Philippine Competition Commission (PCC) before completing mergers or acquisitions that meet the thresholds.
• Conduct a competition impact assessment to understand the potential effects on market competition.
• Cooperate with PCC during the review process and provide all required documentation and information.

Procedures for Ensuring Compliance

1. Internal Compliance Programs

Establishment:

• Develop a comprehensive competition law compliance program tailored to the specific needs and risks of your business.

Components:

• Policies and Procedures: Create clear policies and procedures to prevent anti-competitive behavior.
• Training and Awareness: Provide regular training and awareness programs for employees at all levels.
• Monitoring and Auditing: Implement mechanisms to monitor compliance and conduct regular audits to identify and address potential issues.

2. Legal Advice and Risk Assessment

Engagement:

• Seek legal advice from experts in competition law to ensure business practices comply with the Philippine Competition Act.

Risk Assessment:

• Conduct regular risk assessments to identify areas of potential non-compliance and develop strategies to mitigate risks.

3. Document Management and Transparency

Documentation:

• Maintain detailed records of all business transactions, agreements, and communications that could be relevant to competition law compliance.

Transparency:

• Ensure transparency in business dealings, especially in interactions with competitors, customers, and suppliers.

4. Responding to PCC Investigations

Cooperation:

• Fully cooperate with the PCC during investigations, including providing requested documents and information in a timely manner.

Legal Representation:

• Engage legal representation to guide and protect your interests during PCC investigations.

Common Pitfalls to Avoid

1. Unintentional Anti-Competitive Agreements:

   • Avoid informal discussions or agreements with competitors that could be interpreted as anti-competitive.

2. Ignoring Market Power:

   • Be aware of your market position and avoid practices that could be considered as abuse of dominance.

3. Failure to Notify Mergers or Acquisitions:

   • Ensure timely notification to the PCC for mergers or acquisitions that meet the required thresholds.

4. Inadequate Training and Awareness:

   • Regularly update training programs to reflect changes in competition law and ensure all employees understand their obligations.

Conclusion

Compliance with the Philippine Competition Act is essential for promoting fair business practices and avoiding legal penalties. By understanding the key provisions and implementing robust compliance programs, businesses can navigate the complexities of competition law effectively.