The Philippine Competition Commission (PCC) has issued a decision on its first case on abuse of dominance. Abuse of dominance is a violation of Section 15 of the Philippine Competition Act (PCA).
PCC Case No. E-2019-001 (Case) involves a case for abuse of dominance against a condominium developer arising from the exclusive supply by a single internet service provider (ISP) of in-house internet services to all the occupants of its nine residential projects in the Philippines. The respondents in the Case (Respondents) conceded that their conduct constitutes abuse of dominance and proposed certain commitments to the PCC. The PCC determined that such commitments were sufficient to remedy the harm arising from their wrongful conduct, as these will (i) cease the anti-competitive conduct and prevent its recurrence, (ii) restore competition, and (iii) effect deterrence. Nonetheless, the PCC imposed an administrative fine on the Respondents.
Implications for businesses
The Case serves as an example of acts that the PCC considers as constituting abuse of dominance, and the corresponding remedies that the PCC considers as sufficient to address the damage arising from such conduct. It also shows the PCC's active prosecution of violations of the PCA, which should caution businesses from engaging in conduct that would violate the PCA.
What the Case says
The Case stemmed from a Statement of Objections filed by the Competition Enforcement Office of the PCC (CEO) against the Respondents, UDH Manila Corporation (UDH) and 8990 Holdings Inc. (8990 Holdings), in connection with contractual arrangements that resulted in Fiber to Deca Homes (FTDH) being designated as sole ISP of the Respondents' nine condominium projects.
8990 Holdings is a publicly listed company which owns several subsidiaries, including UDH, a real estate company authorized to own land and common areas of a condominium project in Manila.
The Respondents conceded that they abused their dominant position in property management services by preventing ISPs other than FTDH from providing fixed-line internet services to the residents of Urban Deca Homes Manila (UDH Manila), a condominium project in Tondo, Manila. As a result, residents of UDH Manila suffered damage as they were deprived of alternatives to FTDH's fixed-line internet services, despite their complaints regarding the quality and price of such services.
Both Respondents and the CEO submitted a joint motion for the PCC to approve certain commitments, conditions and terms to remedy the harm arising from the violation.
The PCC confirmed the sufficiency of the proposed measures, including those identified below, and determined that the same will (i) cease the anti-competitive conduct and prevent its recurrence, (ii) restore competition, and (iii) effect deterrence:
- The Respondents will immediately cease the subject conduct.
- The Respondents will post notices / bulletins in conspicuous places in the condominium projects and all their real estate projects stating that there is no exclusive ISP for such project and that residents and tenants are free to avail of the services of other ISPs.
- The Respondents will invite other ISP and telecommunication companies to offer / market their services in the condominium projects under fair, reasonable and non-discriminatory terms.
- The Respondents shall notify and allow residents, tenants or customers who are in a lock-in period to opt-out of their ISP subscription contracts at no cost and without penalty in any form, and undertakes not to discriminate against such residents, tenants or customers that have shifted to other ISPs.
- The Respondents will issue a public apology in two newspaper of national circulation.
- The Respondents shall adopt manuals and/or house rules to buyers of condominium units that will include the foregoing arrangements.
- The Respondents shall submit documents such as board resolutions evidencing that: (1) it shall be company policy to distribute informational materials regarding the Philippine competition law to the CEO, Deputy CEO, COO, CFO, General Managers, Area Managers and Branch Managers (collectively Officers) who must cascade the information to their staff; (2) all new employees will undergo training on Philippine competition law as part of their onboarding or company orientation; (3) Officers will undergo training on Philippine competition law and they shall do so every three years;
- The Respondents shall submit a report, under oath, every three months for one year (or at such other times as may be requested by the PCC) on the condominium projects which shall contain specified information regarding its compliance with the commitments, terms and conditions.
- For one year, the Respondents shall allow the PCC to conduct interviews the Respondents or any related entity or persons regarding the matters set out above, and inspect records describing in detail any action or activities covered by the above commitments.
- The President / CEO of the Respondents shall prepare the final report at the end of the one-year period and shall certify under oath that the Respondents have complied with all its commitments.
In emphasizing that dominance per se does not violate the PCA, the PCC distinguished the same from abuse of dominance by citing the case of United Brands v. Commission from the European Union. In that case, the EU Court of Justice explained that dominance that constitutes a violation of competition laws is one that relates to a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by affording it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of consumers. The PCC also mentioned that a market dominant entity bears a special responsibility, irrespective of the causes of that position, not to allow its conduct to impair genuine undistorted competition in the relevant market.
The PCC agreed to reduce the administrative fine to be paid by the Respondents by 25% considering that the Respondents (i) voluntarily desisted from continuing the complained conduct, (ii) voluntarily sent letters to other ISP inviting them to offer services to their condominium projects, and (iii) agreed to issue a public apology in a newspaper of national circulation.
Actions to consider
This Case is an example of the PCC's enforcement action against abuse of dominance. Businesses would benefit from conducting an internal review of their operations to determine whether and in what areas they may be considered as dominant, and the transactions and arrangements that are in place, in order to determine risk areas.
Based also on the Case, businesses are encouraged to institute a competition compliance program that would involve everyone in the organization, particularly the senior management, which should lead and be responsible for the organization's compliance, and including all employees, which must be trained and directed to observe compliance.