There are two prohibited acts under Republic Act No. 10667, also known as the “Philippine Competition Act“, to wit: (a) Anti-Competitive Agreements; and (b) Abuse of Dominant Position. The basic difference is that anti-competitive agreements can only be committed by at least two entities. This article discusses the second prohibited act — abuse of dominant position, basically involving predatory pricing and non-price predation. The headings are added for convenience.

It shall be prohibited for one or more entities to abuse their dominant position by engaging in conduct that would substantially prevent, restrict or lessen competition, with the nine (9) acts enumerated below.

An entity refers to any person, natural or juridical, sole proprietorship, partnership, combination or association in any form, whether incorporated or not, domestic or foreign, including those owned or controlled by the government, engaged directly or indirectly in any economic activity.

1. SELLING BELOW COST

Selling goods or services below cost with the object of driving competition out of the relevant market. 

In the Commission’s evaluation of this fact, however, it shall consider whether the entity or entities have no such object and the price established was in good faith to meet or compete with the lower price of a competitor in the same market selling the same or comparable product or service of like quality.

2. BARRIERS TO ENTRY

Imposing barriers to entry or committing acts that prevent competitors from growing within the market in an anti-competitive manner except those that develop in the market as a result of or arising from a superior product or process, business acumen, or legal rights or laws.

3. IMPOSING UNRELATED OBLIGATIONS

Making a transaction subject to acceptance by the other parties of other obligations which, by their nature or according to commercial usage, have no connection with the transaction.

4. DISCRIMINATORY PRICING

Setting prices or other terms or conditions that discriminate unreasonably between customers or sellers of the same goods or services, where such customers or sellers are contemporaneously trading on similar terms and conditions, where the effect may be to lessen competition substantially. 

However, the following shall be considered permissible price differentials:

• i. Socialized pricing for the less fortunate sector of the economy;

• ii. Price differential which reasonably or approximately reflect differences in the cost of manufacture, sale, or delivery resulting from differing methods, technical conditions, or quantities in which the goods or services are sold or delivered to the buyers or sellers;

• iii. Price differential or terms of sale offered in response to the competitive price of payments, services or changes in the facilities furnished by a competitor; and

• iv. Price changes in response to changing market conditions, marketability of goods or services, or volume;

5. RESTRICTIONS TO LESSEN COMPETITION

Imposing restrictions on the lease or contract for sale or trade of goods or services concerning where, to whom, or in what forms goods or services may be sold or traded, such as 

• i. fixing prices, 

• ii. giving preferential discounts or rebate upon such price, or 

• iii. imposing conditions not to deal with competing entities, 

where the object or effect of the restrictions is to prevent, restrict or lessen competition substantially.

However, nothing contained in the Act shall prohibit or render unlawful:

• i. Permissible franchising, licensing, exclusive merchandising or exclusive distributorship agreements such as those which give each party the right to unilaterally terminate the agreement; or

• ii. Agreements protecting intellectual property rights, confidential information, or trade secrets;

6. PREDATORY BUNDLING

Making supply of particular goods or services dependent upon the purchase of other goods or services from the supplier which have no direct connection with the main goods or services to be supplied.

7. PURCHASING FROM CERTAIN SECTORS AT UNFAIRLY LOW PRICES

Directly or indirectly imposing unfairly low purchase prices for the goods or services of, among others, marginalized agricultural producers, fisherfolk, micro-, small-, medium-scale enterprises, and other marginalized service providers and producers.

8. IMPOSING PRICES ON COMPETITORS AND MARKET

Directly or indirectly imposing unfair purchase or selling price on their competitors, customers, suppliers or consumers, provided that prices that develop in the market as a result of or due to a superior product or process, business acumen or legal rights or laws shall not be considered unfair prices.

9. LIMITING MARKETS

Limiting production, markets or technical development to the prejudice of consumers, provided that limitations that develop in the market as a result of or due to a superior product or process, business acumen or legal rights or laws shall not be a violation of the Act.

COMMON PROVISIONS; PENALTIES

Nothing in R.A. 10667 or its IRR shall be construed or interpreted as a prohibition on having a dominant position in a relevant market or on acquiring, maintaining and increasing market share through legitimate means that do not substantially prevent, restrict or lessen competition.

Any conduct which contributes to improving production or distribution of goods or services within the relevant market, or promoting technical and economic progress while allowing consumers a fair share of the resulting benefit may not necessarily be considered an abuse of dominant position.

These provisions shall not constrain the Commission or the relevant regulator from pursuing measures that would promote fair competition or more competition as provided in the Act.

Administrative Fines

The imposition of administrative finds is separate from the penalties in a criminal prosecution. The Philippine Competition Competition may, after due notice and hearing, may impose the following schedule of administrative fines on any entity found to have violated the said sections:

• First offense: Fine of up to P100,000,000

• Second offense: Fine of not less than P100,000,000, but not more than P250,000,000

In fixing the amount of the fine, the Commission shall have regard to both the gravity and the duration of the violation.

[There is no criminal penalty for Abuse of Dominant Position, unlike in Anti-Competition Agreements.]