Enforcement

Complaints procedure for private parties

Is there a procedure whereby private parties can complain to the authority responsible for antitrust enforcement about alleged unlawful vertical restraints?

Yes. Any entity with an interest over the assailed vertical restraints may file a complaint with the PCC. Upon the filing of a verified complaint, the PCC shall either deny it or give due course. If the PCC decides to give due course to the complaint, the PCC shall, through the Enforcement Office, commence a Preliminary Inquiry within 10 days of receipt of the complaint.

The Preliminary Inquiry shall be completed within 90 days of commencement. The Enforcement Office may:

  • find that there is no violation of Philippine competition laws and regulations;
  • close the Preliminary Inquiry without prejudice, if the facts or information available at the end of the 90-day period are insufficient to proceed, on the basis of reasonable grounds, to the conduct of a Full Administrative Investigation; or
  • issue a resolution to proceed, on the basis of reasonable grounds, to the conduct of a Full Administrative Investigation. The complaint shall be notified of the results of the Preliminary Inquiry within 15 days of the termination of the Preliminary Inquiry.

If the Enforcement Office decides to proceed to a Full Administrative Investigation, the entity subject of the complaint shall be notified and a notice on the commencement of the Full Administrative Investigation shall be uploaded in the PCC’s website.

The Full Administrative Investigation may be concluded with the Enforcement Office either issuing a Statement of Objections (SO), which charges the concerned entity with having violated the PCA, or closing the Investigation without finding any violation. If an SO is issued, it shall be filed with the PCC en banc (ie, the Chairman and the Commissioners of the PCC).

Within 15 days of the receipt of the SO, the PCC en banc may either: dismiss the SO; or issue the corresponding summons (with a copy of the SO) to the respondent. The respondent would be given the opportunity to file a verified answer during the period prescribed by the PCC en banc, which may not be less than 30 days but not more than 60 days. The Enforcement Office may file a reply within 20 days of receipt of the verified answer.

Upon receipt of the verified answer, the PCC en banc may submit the case for a decision, in which case, a decision shall be rendered within 45 days. Alternatively, the PCC en banc may hold further proceedings, which shall include a preliminary conference and submission of preliminary conference briefs and position papers. During this period, the PCC en banc may conduct clarificatory conferences, require the submission of additional documents, require the submission of additional pleadings such as positions papers, and consult sector regulators, relevant Philippine government agencies, and agencies from foreign jurisdictions if appropriate.

After the filing of the last pleading or the conduct of the last hearing, the PCC en banc shall issue an order submitting the case for decision. A decision shall be made within 60 days of the time the case is submitted for decision. A decision may be the subject of a motion for reconsideration, and afterwards, may be appealed to the Philippine Court of Appeals.

Regulatory enforcement

How frequently is antitrust law applied to vertical restraints by the authority responsible for antitrust enforcement? What are the main enforcement priorities regarding vertical restraints?

Owing to the circumstances described in question 1, there are not yet any decisions on vertical restraints. That said, the PCC has announced it has commenced an investigation of the cement industry for alleged violations of, among others, the prohibition on abuse of dominant position. The PCC has not yet issued any decision or ruling on this.

What are the consequences of an infringement of antitrust law for the validity or enforceability of a contract containing prohibited vertical restraints?

The PCA does render void agreements containing vertical restraints. The Philippine Civil Code, however, provides that agreements whose cause, object or purpose is contrary to law are void. At the same time, however, the Philippine Civil Code also provides that in cases of divisible contracts, the legal provisions may be enforced if they can be separated from the illegal provisions. The Philippine Supreme Court has applied this in a number of cases to uphold the validity of the remaining provisions agreements, minus the void or illegal provisions, for as long as the provisions are separable and the intention of the parties under the agreement can still be fulfilled. In any event, it would be advisable to include a severability clause in the agreement so that the vertical restraint, if found to be illegal, can be severed with the rest of the agreement remaining intact and valid.

May the authority responsible for antitrust enforcement directly impose penalties or must it petition another entity? What sanctions and remedies can the authorities impose? What notable sanctions or remedies have been imposed? Can any trends be identified in this regard?

Anticompetitive vertical restraints, or vertical restraints constituting abuse of dominant position are penalised by administrative fines in the following amounts:

  • first offence: fine of up to 100 million pesos;
  • second offence: fine ranging from 100 million pesos to 250 million pesos; and
  • third and succeeding offences: fine ranging from 150 million pesos to 250 million pesos.

However, if the violation involves basic necessities and prime commodities as defined under the Philippine Price Act, the damages shall be tripled. Basic necessities are essentially goods that are vital to the sustenance and existence of consumers during certain events, such as calamities, emergencies, rebellion or war. Examples of basic necessities are rice, corn, root crops, bread; fresh, dried or canned fish and other marine products; fresh pork, beef and poultry meat; fresh eggs; potable water in bottles and containers; fresh and processed milk; fresh vegetables and fruits; locally manufactured instant noodles; coffee; sugar; cooking oil; salt; laundry soap and detergents; firewood; charcoal; household liquefied petroleum gas and kerosene; candles; drugs classified as essential by the Department of Health. Prime commodities are goods, which while not being basic necessities, are nevertheless essential during certain events, such as calamities or emergencies. Examples of prime commodities are flour; dried, processed or canned pork, beef and poultry meat; dairy products not falling under basic necessities; onions, garlic, vinegar, patis, soy sauce; toilet soap; fertiliser, pesticides and herbicides; poultry, livestock and fishery feeds and veterinary products; paper; school supplies; nipa shingles; sawali; cement; clinker; GI sheets; hollow blocks; plywood; plyboard; construction nails; batteries; electrical supplies; light bulbs; steel wire; and all drugs not classified as essential drugs by the Department of Health.

In addition to the imposition of administrative fines, the PCC can also impose:

  • behavioural remedies, which oblige the concerned entity to act in a specific way, or to cease or refrain from engaging in specific conduct;
  • structural remedies, which effectively change the structure of the market in order to maintain, enhance or restore the market’s structure;
  • an injunction, which either orders the concerned entity to perform a particular act or to stop or refrain from doing an act or continuing a particularly activity or course of action;
  • disgorgement, which requires the concerned entity to disgorge excess profits or any other form or benefit or gain reasonably connected to the violation of Philippine competition laws; and
  • divestiture, which requires the concerned entity to change its structure through partial or full disposal of businesses, shareholdings, business units, or tangible or intangible asset.

As no decisions on vertical restraints have been made, there is no history in the Philippines as to the amounts of fines levied or types of remedies imposed.

Investigative powers of the authority

What investigative powers does the authority responsible for antitrust enforcement have when enforcing the prohibition of vertical restraints?

The PCC has the power to issue subpoenas to compel testimony and the production of documents.

Private enforcement

To what extent is private enforcement possible? Can non-parties to agreements containing vertical restraints obtain declaratory judgments or injunctions and bring damages claims? Can the parties to agreements themselves bring damages claims? What remedies are available? How long should a company expect a private enforcement action to take?

Section 45 of the PCA provides that ‘any person who suffers direct injury by reason of any violation of [the PCA] may institute a separate and independent civil action after the [PCC] has completed its preliminary inquiry.’ The broadness of the provision seems to allow both parties and non-parties to the agreements to bring actions for damages. While not provided for under the PCA, general laws on the matter allow claimants to claim and recover legal costs.

We are not aware of any private enforcement having been filed and resolved by the courts, and consequently, there is not yet any precedent that can serve as guidance on how long it will take before a private action can be resolved. In general, however, court cases in the Philippines take a long time and are susceptible to delays.