XI. PHILIPPINE COMPETITION ACT (R.A. No. 10667) Flashcards
XI. PHILIPPINE COMPETITION ACT (R.A. No. 10667)
A. Anti-Competitive Agreements (Section 14)
Understanding Anti-Competitive Agreements
This section of the law prohibits agreements between competitors that harm competition.
1) Prohibited Agreements:** The law outlines two categories of prohibited agreements:
* Per Se Prohibited: These agreements are automatically illegal regardless of their actual impact on competition. Examples include:
* Fixing prices at auctions or bids.
* Restricting competition on pricing or other terms of trade.
* Agreements with Anti-Competitive Effect: These agreements are illegal if they have the object or effect of substantially preventing, restricting, or lessening competition. Examples include:
* Dividing markets among competitors.
* Limiting production or technical development.
2) Safe Harbor Provision:** Agreements that improve production, distribution, or technological progress may be allowed if consumers benefit.
3) Who are Competitors:** Companies under common control or unable to act independently are not considered competitors for this law.
Exam Tips:
* Memorize the two categories of prohibited agreements and their key examples.
* Understand the “object vs. effect” test for agreements in the second category.
* Be prepared to analyze hypothetical scenarios and determine if an agreement violates the law. Consider the potential impact on competition, consumer benefits, and the safe harbor provision.
Examples:**
* Illegal: Two gas station owners in a small town agree to fix gas prices. (Per Se Prohibited - Price Fixing)
* Possible Violation: A group of construction companies agree to specialize in different types of projects (e.g., one focuses on bridges, another on buildings) to avoid competition. (Needs analysis - Could be market division, but might also improve efficiency)
* Likely Legal: Two airlines collaborate on a frequent flyer program to attract more customers. (Safe Harbor - May improve service and benefit consumers)
XI. PHILIPPINE COMPETITION ACT (R.A. No. 10667)
B. Abuse of Dominant Position (Section 15)
Understanding Abuse of Dominant Position
This section of the law prohibits companies with a dominant market position from engaging in practices that unfairly harm competition.
Key Points:**
1) Dominant Position:** The law applies to entities with a significant degree of power in a market.
2) Prohibited Conduct:** Companies cannot engage in conduct that substantially prevents, restricts, or lessens competition. Examples include:
A) Predatory Pricing:** Selling below cost to drive competitors out (with exceptions).
B) Raising Barriers to Entry:** Making it difficult for new competitors to enter the market (excluding those arising from superior products or business practices).
C) Tying Arrangements:** Forcing customers to buy unwanted products or services along with desired ones.
D) Unreasonable Price Discrimination:** Charging different prices to similar customers without justification.
E) Resale Price Maintenance:** Controlling the price at which resellers sell your products.
F) Unfairly Low Purchase Prices:** Imposing unfairly low prices on suppliers, particularly vulnerable groups.
G) Limiting Production or Innovation:** Artificially restricting production or hindering technological advancements.
Safe Harbor Provisions:**
- Certain practices may be allowed if they:
* Improve production or distribution efficiency.
* Promote technical and economic progress.
* Lead to a fair share of benefits for consumers.
Exam Tips:**
* Understand the concept of a dominant position and its indicators (e.g., high market share).
* Memorize the different types of prohibited conduct and their justifications, including exceptions.
* Analyze hypothetical scenarios to identify potential abuse of dominant position and apply the relevant legal principles.
* Remember the safe harbor provisions and how they might apply to specific situations.
XI. PHILIPPINE COMPETITION ACT (R.A. No. 10667)
C. Mergers and Acquisitions (Sections 16-22)
Understanding Merger Reviews and Exemptions
These sections deal with government review and potential exemptions for mergers and acquisitions (M&A) to ensure fair competition. H
Key Points:**
1) Notification Requirement:** Companies exceeding a certain transaction value threshold (set by regulations) must notify the Commission about an M&A.
2) Prohibited Mergers:** The Commission can block mergers that substantially prevent, restrict, or lessen competition in a relevant market.
3) Exemptions:** Mergers can be exempt from prohibition if:
a) Efficiency Gains:** The merger creates significant efficiencies that outweigh any potential harm to competition. (e.g., combining operations to reduce costs)
b) Failing Firm Defense:** One party is facing financial failure, and the merger is the least anti-competitive option to preserve that company (e.g., preventing a competitor from acquiring its assets at a fire sale price).
Burden of Proof:**
* The burden is on the companies involved to prove they qualify for an exemption.
Exam Tips:
* Understand the notification thresholds and procedures.
* Grasp the concept of “substantially preventing competition” in the context of M&A.
* Analyze hypothetical scenarios to determine if a merger is likely to be approved or blocked based on potential harm to competition and the availability of exemptions.
* Remember the burden of proof lies with the companies seeking an exemption.
Examples:
* Prohibited Merger: Two large grocery chains in a small town merge, leaving consumers with limited choices.
* Possible Exemption (Efficiency Gains): Two banks merge, creating opportunities for streamlined operations and improved loan options for customers.
* Possible Exemption (Failing Firm Defense): A struggling department store chain merges with a larger competitor to avoid bankruptcy.
By understanding these key points and practicing with various scenarios, you’ll be better equipped to handle Bar Exam questions on merger reviews and exemptions. Remember, the goal is to ensure competition remains healthy for the benefit of consumers.
Challenging Multiple Choice Questions on Anti-Competitive Agreements (Bar Prep)
Question 1:
Two national fast-food chains, Burger King and MegaBurger, operate in a highly competitive market with several other players. They enter into an agreement to offer a joint loyalty program where customers can earn points redeemable at either restaurant. This agreement is likely:
a) Per se illegal because it involves collaboration between competitors.
b) Illegal if it discourages customers from choosing other fast-food chains.
c) Legal because it provides more benefits to consumers through a combined program.
d) Requires an analysis under the “rule of reason” to determine its impact.
Answer: (d)
Legal Reasoning:
This scenario doesn’t involve per se prohibited activities like price fixing (option a). Here’s why option (d) is the most appropriate answer:
- The agreement involves collaboration between competitors, but it doesn’t directly restrict pricing or market share.
- We need to analyze the agreement under the “rule of reason” test found in Section 14(b).
- This test considers the agreement’s object (intent) and effect on competition:
- The object might be to attract more customers by offering a broader reward program.
- The effect could potentially lessen competition by steering customers towards these two chains, but it could also increase efficiency and benefit consumers through more reward options.
Therefore, a full analysis is needed to determine if the agreement violates the law. Option (b) focuses on a specific potential harm but ignores other aspects of the analysis. Option (c) assumes consumer benefits without considering potential anti-competitive effects.
Question 2:
A local cable company and an internet service provider (ISP) agree that the cable company will not offer internet services, and the ISP will not offer cable TV services. This agreement is most likely:
a) Legal because it allows each company to specialize in its core business.
b) Illegal because it divides the market and restricts competition.
c) Depends on whether other cable and internet providers exist in the area.
d) Only illegal if the companies control a majority market share.
Answer: (b)
Legal Reasoning:
This scenario clearly falls under the agreements with an anti-competitive effect category in Section 14(b)(2). Here’s why option (b) is the most likely answer:
- The agreement explicitly divides the market for bundled services (cable TV and internet) by customer segment.
- This restricts consumer choice and potentially stifles competition in the combined market.
Option (a) ignores the anti-competitive aspect. While specialization can be beneficial, the agreement eliminates competition in a specific service bundle. Option (c) suggests market share might be relevant, but market division itself is a violation even with other providers present. Option (d) is not always a factor; the act of dividing the market is enough to trigger a violation.
explain Merger REview process
Understanding Merger Review Process (Bar Exam Prep)
These sections outline the process for government review of mergers and acquisitions (M&A) exceeding a specific value threshold. Here’s a breakdown for your Bar Exam preparation:
Key Points:
1) Review Authority:** The Commission has the power to review mergers and acquisitions based on relevant factors (Section 16).
2) Notification Requirement:** Parties to an M&A with a transaction value exceeding 1 billion pesos (Section 17) must notify the Commission before finalizing the deal.
3) Notification Contents and Additional Information:**
* The notification must be in a format and include information specified by Commission regulations.
* The Commission may request further relevant information during the review.
4) Review Period:**
* The initial notification period is 30 days.
* If the Commission requests more information, the review period extends by an additional 60 days.
* The total review period cannot exceed 90 days from the initial notification.
5) Deemed Approval:** If no decision is issued after the review period, the M&A is deemed approved.
6) Confidentiality:** Information submitted during the review is confidential unless:
* The notifying party consents to disclosure.
* Disclosure is legally required by a court order or regulatory agency.
7) Special Cases:**
* M&As involving certain sectors (e.g., banks, utilities) may require additional approvals from relevant government agencies.
* A favorable recommendation by a competition authority creates a presumption that the M&A complies with this Act.
Exam Tips:
* Memorize the notification threshold and review periods.
* Understand the process for submitting notifications and potential requests for additional information.
* Be aware of the confidentiality rules and exceptions.
* Identify the situations where additional approvals might be needed beyond the Commission’s review.
Examples:
* Two large telecommunication companies plan to merge. Their transaction value exceeds 1 billion pesos, so they must notify the Commission before finalizing the deal.
* The Commission reviewing the merger might request additional data on market share and potential impact on competition.
* If the Commission doesn’t issue a decision within 90 days, the merger is deemed approved, and the companies can proceed.
* Even with Commission approval, a merger involving a bank might still require a separate approval from the relevant banking regulator.
