This country-specific Q&A provides an overview of Cartels laws and regulations applicable in Philippines.
What is the relevant legislative framework?
Republic Act No. 10667, otherwise known as the Philippine Competition Act [PCA], is the governing law. Sections 14 of the PCA, in particular, prohibits anti-competitive agreements. It provides:
“(a) The following agreements, between or among competitors, are per se prohibited:
(1) Restricting competition as to price, or components thereof, or other terms of trade;
(2) Fixing price at an auction or in any form of bidding including cover bidding, bid suppression, bid rotation and market allocation and other analogous practices of bid manipulation;
(b) The following agreements, between or among competitors which have the object or effect of substantially preventing, restricting or lessening competition shall be prohibited:
(1) Setting, limiting, or controlling production, markets, technical development, or investment;
(2) Dividing or sharing the market, whether by volume of sales or purchases, territory, type of goods or services, buyers or sellers or any other means.
(c) Agreements other than those specified in (a) and (b) of this Section which have the object or effect of substantially preventing, restricting or lessening competition shall also be prohibited: Provided, Those which contribute to improving the production or distribution of goods and services or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefits, may not necessarily be deemed a violation of this Act.”
The PCA also created the Philippine Competition Commission [PCC] which serves as the independent quasi-judicial body with original and primary jurisdiction over the enforcement and implementation of the Act.
Pursuant to its authority under the PCA, the PCC issued the Implementing Rules and Regulations of the PCA and the 2017 Rules of Procedure which applies to investigations, hearing, and proceedings of the PCC, except matters relating to merger review. It has likewise promulgated rules to govern its Leniency Program [Leniency Rules].
To establish an infringement, does there need to have been an effect on the market?
Yes, for agreements falling within Section 14(b) and (c) of the PCA. Agreements under Section 14(a), on the other hand, are per se prohibited.
Does the law apply to conduct that occurs outside the jurisdiction?
Yes, if such conduct has direct, substantial, and reasonably foreseeable effects in trade, industry, or commerce in the Philippines.
Which authorities can investigate cartels?
The PCC has primary authority under the PCA to conduct inquiry, investigate, and hear and decide cartel cases. The PCC also has authority to institute the appropriate civil or criminal proceedings for PCA violations.
If evidence warrants criminal liability, the PCC may file before the Department of Justice [DOJ] criminal complaints for preliminary investigation and prosecution before the proper court.
What are the key steps in a cartel investigation?
(a) Initiating an Investigation
An investigation may be initiated on the basis of a verified complaint, referral by a regulatory agency, or motu proprio directive from the Commission. The Commission comprises of the Chairman and Commissioners of the PCC. Preliminary Inquiry [PI] is conducted by the Competition Enforcement Office [CEO] of the PCC to ascertain whether there are reasonable grounds to conduct a Full Administrative Investigation [FAI].
The PI commences 10 days from receipt of the verified complaint or referral. The CEO may also resolve to deny due course to the complaint or referral taking into consideration the PCC’s jurisdiction, public interest, resource allocation, likelihood of a successful outcome, non-compliance with formal requirements, or absence of reasonable grounds.
The CEO has 90 days to complete the PI and issue a resolution to close the investigation or proceed with FAI. The PI may be closed if no violation or infringement is found, or if the facts or information available at the end of the 90-day period are insufficient to proceed to an FAI. The PCC will notify the complainant or referring agency, as the case may be, within 15 days from termination .
At any time after PS is terminated, the PCC may file criminal complaints before the DOJ if the evidence so warrants.
(b) Full Administrative Investigation
If the CEO finds reasonable grounds to conduct of an FAI, further proceedings will be conducted to ascertain whether there is sufficient basis to charge an entity. The CEO may, in its discretion, conduct a conference with the entity under investigation for purposes of clarifying or ascertaining facts, issues, and other matters necessary and relevant to the FAI.
After the FAI, the CEO will either close the investigation, or file a Statement of Objections [SO] with the Commission charging the entity with the violation.
An SO is filed if the CEO finds that there exist facts and circumstances that would engender reasonable belief that the entity under investigation engaged in cartel activities. The SO contains the following information: (i) identity of the respondents, (ii) description of the violations, (iii) a summary of the facts and relevant factors that would reasonably tend to aggravate liability, and (iv) evidence supporting the alleged violations. It may also include a recommendation on the imposable fines and remedies. Such recommendation, however, is not binding on the Commission.
Upon submission of the SO by the CEO, the Commission will conduct adjudication proceedings to determine substantial evidence of a violation and to determine the appropriate penalties and remedies.
What are the key investigative powers that are available to the relevant authorities?
The PCA grants the PCC general authority to issue subpoena duces tecum and subpoena ad testificandum to require the production of books, records, or other documents or data which relate to any matter relevant to the investigation and personal appearance before the Commission, summon witnesses, administer oaths, and issue interim orders such as show cause orders and cease and desist orders after due notice and hearing.
In addition, the PCC is authorised to, upon order of the court, undertake inspections of business premises and other offices, land and vehicles, as used by the entity, where it reasonably suspects that relevant books, tax records, or other documents which relate to any matter relevant to the investigation are kept, in order to prevent the removal, concealment, tampering with, or destruction of the books, records, or other documents.
On what grounds can legal privilege be invoked to withhold the production of certain documents in the context of a request by the relevant authorities?
Attorney-client privilege may apply. Under the Rules of Evidence, an attorney cannot, without the consent of his client, be examined as to any communication made by the client to him, or his advice given thereon in the course of, or with a view to, professional employment, nor can an attorney’s secretary, stenographer, or clerk be examined, without the consent of the client and his employer, concerning any fact the knowledge of which has been acquired in such capacity.
The Rules of Evidence however applies to judicial proceedings before the courts. The PCC has yet to issue rules on treatment of privileged information in its administrative investigations.
What are the conditions for a granting of full immunity? What evidence does the applicant need to provide? Is a formal admission required?
The Leniency Rules provides that any entity who may be liable for a violation of Sections 14(a) or 14(b) of the PCA may apply with the PCC for leniency. Any current or former director, officer, trustee, partner, employee, or agent of a juridical entity may also apply for immunity independently of the entity.
Any reporting individual or entity is eligible for immunity from suit if it does so prior to commencement of an investigation, under the following conditions:
at the time the entity comes forward, the PCC has not received information about the activity from any other entity that has been granted conditional immunity from suit;
upon the entity’s discovery of illegal activity, it took prompt and effective action to terminate its participation therein;
the entity reports the wrongdoing with candor and completeness and provides full, continuing, and complete cooperation throughout the investigation; and
The entity did not coerce another party to participate in the activity and clearly was not the leader in, or the originator of, the activity.
The applicant must submit information and evidence on the following within 30 days from being issued a marker:
(a) The entities involved in the alleged anti-competitive agreement;
(b) The affected product(s) or service(s)
(c) The affected geographic area(s) or territory(ies);
(d) The duration of the alleged anti-competitive agreement;
(e) The reasons why the entity is eligible under the Leniency Program;
(f) The nature of the alleged anti-competitive agreement; and
(g) Information on any past leniency applications with the PCC and other competition authorities outside the Philippines in relation to the alleged anti-competitive agreement.
What level of leniency, if any, is available to subsequent applicants and what are the eligibility conditions?
If the reporting entity fails to submit the required information within the prescribed period, the subsequent applicant may be considered for immunity.
If the application is submitted after the PCC has received information about cartel activities or after a PI has begun, the entity may be eligible for exemption, waiver, or gradation of administrative fines, subject to the following conditions:
(a) The entity is the first to come forward and qualify for reduction of administrative fines;
(b) Upon discovery of the violation, it took prompt action to terminate its participation;
(c) the entity reports the wrongdoing with candor and completeness and provides full, continuing, and complete cooperation throughout the investigation;
(d) at the time the entity comes forward, the PCC does not have evidence against the entity that is likely to result in a sustainable conviction; and
(e) granting such leniency would not be unfair to others.
Are markers available and, if so, in what circumstances?
Yes, an entity seeking the benefits of the Leniency Program may request the PCC for a marker at any time prior to adjudication. The marker protects an entity’s place in the queue for applicants under the Leniency Program and allows the entity an initial period of 30 days within which to gather and submit information and evidence to the PCC.
What is required of immunity/leniency applicants in terms of ongoing cooperation with the relevant authorities?
The applicant must provide full, continuing, and complete cooperation throughout the investigation until the finality of any and all administrative case(s), as well as civil case(s) initiated by the PCC on behalf of affected parties and third parties.
Does the grant of immunity/leniency extend to immunity from criminal prosecution (if any) for current/former employees and directors?
Yes, if the application for immunity is filed jointly by the juridical entity and the involved officer, directors, or employees. Full immunity includes immunity from administrative and criminal liability, as well as civil actions initiated by the PCC on behalf of affected parties and third parties.
Is there an ‘amnesty plus’ programme?
Does the investigating authority have the ability to enter into a settlement agreement or plea bargain and, if so, what is the process for doing so?
Yes, the PCC has authority to enter into a settlement under such terms and conditions that are fair and reasonable.
An entity under investigation may submit to the CEO a proposal for settlement at any time after commencement of PI but prior to the termination of the FAI. If the CEO finds that the proposed settlement is proper and reasonable, the CEO and respondent will file with the Commission a joint motion for approval of the proposed settlement before the case is submitted for decision.
The Commission has full discretion to approve or deny a joint motion for settlement. If the joint motion for settlement is denied, the Commission may nevertheless appoint a mediator or provide for such other means to facilitate further discussions between the CEO and respondent, and may indicate the terms and conditions that it requires for the approval of a settlement. Such settlement discussion must be concluded within a period 60 days.
What are the key pros and cons for a party that is considering entering into settlement?
In general, settlement may result in a reduction of fines or modifcation of charges. The benefits depend on factors such as the stage at which the settlement is filed, number of respondents moving for settlement, number, nature and gravity of alleged violations, and likelihood of addressing the alleged anti-competitive conduct at the soonest possible time. In case of denial of a joint motion for settlement, such denial will not be construed as a prejudgement on the subject matter covered therein.
A disadvantage of settlement is its impact on timing of the investigation. If the settlement is submitted during PI, the proposal shall not suspend the running of the 90 day period prescribed for completing the same.
What is the nature and extent of any cooperation with other investigating authorities, including from other jurisdictions?
The PCC is empowered to deputise any and all enforcement agencies of the government or enlist the aid and support of any private institution, corporation, entity or association, in the implementation of its powers and functions. In addition, the PCC can intervene or participate in administrative and regulatory proceedings requiring consideration of the provisions of the PCA that are initiated by other government agencies.
With regard to cooperation with other jurisdictions, the PCA designates the PCC as the official representative of the Philippine government in international competition matters.
What are the potential civil and criminal sanctions if cartel activity is established?
An entity that enters into any anti-competitive agreement shall, for each and every violation, be penalized by imprisonment from two to seven years, and a fine of not less than PhP50,000,000.00 but not more than PhP250,000,000.00. The penalty of imprisonment shall be imposed upon the responsible officers, and directors of the entity.
In addition to criminal penalties, the PCA may also impose administrative fines in accordance with the following schedule:
First offense: Fine of up to PhP100,000,000.00;
Second offense: Fine of not less than PhP100,000,000.00, but not more than PhP250,000,000.00.
What factors are taken into account when the fine is set? In practice, what is the maximum level of fines that has been imposed in the case of recent domestic and international cartels?
In fixing the amount of the fine, the PCA provides that the Commission shall consider both the gravity and the duration of the violation. To date, the PCC has yet to decide on cartel cases.
Are parent companies presumed to be jointly and severally liable with an infringing subsidiary?
There is no such presumption in the Philippines.
Are private actions and/or class actions available for infringement of the cartel rules?
Private actions are recognized under the PCA. Section 45 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 completion of the PI.
What type of damages can be recovered by claimants and how are they quantified?
Pursuant to Article 2197 of the Philippine Civil Code, damages may be actual or compensatory, moral, nominal, temperate, or exemplary.
Actual or compensatory damages refer to adequate compensation for such pecuniary loss suffered by the claimant as he has duly proved, including profits which the claimant failed to obtain. For claim of other kinds of damages, the assessment is left to the discretion of the courts, according to the circumstances of each case.
On what grounds can a decision of the relevant authority be appealed?
Final orders or decisions of the Commission can be appealed before the Court of Appeals in accordance with the Rules of Court. Under Rule 43 of the Rules of Court, an appeal may be filed on any question of fact, of law, or mixed questions of fact and law.
What is the process for filing an appeal?
An appeal from a decision of the PCC must be filed within 15 days from notice of the award, judgment, final order or resolution. The appeal shall be in the form of a verified petition for review.
The Court of Appeals may require the respondent to file a comment on the petition within 10 days from notice, or dismiss the petition if it finds the same to be patently without merit, prosecuted manifestly for delay, or that the questions raised therein are too unsubstantial to require consideration.
The Court of Appeals will give due course to the petition if it finds prima facie that the PCC has committed errors of fact or law that would warrant reversal or modification of the award, judgment, final order or resolution sought to be reviewed. Otherwise, the petition will be dismissed. The findings of fact of the PCC, when supported by substantial evidence, shall be binding on the Court of Appeals.
What are some recent notable cartel cases (limited to one or two key examples, with a very short summary of the facts, decision and sanctions/level of fine)?
The PCC is slowly building capacity for enforcement cases by release of issuances and guidelines on investigating cases. Since enactment of the PCA 2015 and the end of the transitional period in 2017, the PCC has released its Rules of Procedure, Leniency Rules. It has also worked with the Supreme Court for the release of the Rules on Administrative Search and Inspection under the PCA. At present, the PCC continues to prepare rules to further clarify proceedings on enforcement, such as the recent draft rules involving consent orders. The release of policies and guidelines are intended to facilitate and hasten the PCC’s ability to detect and prosecute cartel cases.
To date, however, the PCC has yet to complete a cartel investigation. The most notable enforcement case initiated by the PCC involves charges against a pool of insurance companies and the National Home Mortgage Finance Corporation with entering into anti-competitive agreements for the exclusive provision of mortgage redemption insurance to its account holders. As of February 2020, the CEO has filed its SO before the Commission.