a. Per Se and Not Per Se Violations

A. Anti-Competitive Agreements – R.A. No. 10667, Section 14

Section 14. Anti-Competitive Agreements.¹ –

(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.

An entity that controls, is controlled by, or is under common control with another entity or entities, have common economic interests, and are not otherwise able to decide or act independently of each other, shall not be considered competitors for purposes of this section.

Elements of Price-fixing

• There are two or more entities in the same horizontal market.
• Basic element: An “agreement” is reached, whether overt or tacit, which implies two or more businesses must be involved in restraint.
• Intent to “fix” prices by restricting competition as to price.

Example of Price-fixing

After several months of competing against each other, Company A and Company B, the only sellers of soda drinks in Quezon City, agreed to set the price of their products to PhP 100.00 per bottle.

Kinds of Bid Rigging

• Cover bidding – A typical example of this is when bidders submit bids that are too high to be accepted. In this scenario, there is no intention to secure the acceptance of the bid but only to make it appear as though there was a genuine competitive bidding.
• Bid suppression – One or more competitors who are expected to bid, or who have previously bid, agree to refrain from bidding or withdraw a previously submitted bid so that the designated winning competitor's bid will be accepted.
• Bid rotation - All conspirators submit bids but take turns on being the low bidder. The terms of the rotation may vary and depend on different circumstances. A strict bid rotation pattern may suggest that collusion is taking place
• Market allocation - Agreements in which competitors divide markets among themselves. In such schemes, competing firms allocate specific customers or types of customers, products, or territories among themselves. A typical example of which is an allocation based on geographic areas where competitors agree to sell only in certain areas and refuse to sell to, or quote intentionally high prices to customers in areas allocated to other conspirators.
• Other analogous practices

ii. Not per se violations

(1) The following agreements, between or among competitors, which have the object or effect of substantially preventing, restricting or lessening competition shall be prohibited:

• Setting, limiting, or controlling production, markets, technical development, or investment;
• 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. (Sec. 14[b])²

Elements of a Sec. 14 (b) Violation

• There is an agreement;
• The parties are competitors or do not belong to a single economic entity;
• The subject of the agreement is to either limit production, or divide or share the market;
• The object or effect of the agreement substantially prevents, restricts or lessen competition.

Note: Violations of Section 14(a) and (b)³ are the only ones in the PCA which carry a penalty of imprisonment; such is imposed upon the responsible officers and directors of the entity; when the entities involved are juridical persons, it is imposed on their officers, directors, or employees holding managerial positions who are knowingly and willfully responsible for the violation. (Sec. 30)⁴

(2) Agreements other than those specified in (a) and (b) of Section 14 which⁵ have the object or effect of substantially preventing, restricting or lessening competition shall also be prohibited. (Sec. 14[c])

Exception: 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 the PCA. (Sec. 14[c])

Rule of Reason Violations

When a violation is labeled as Rule of Reason, it cannot be said to be immediately illegal. The reason for this is that such conduct may possess reasonable commercial justifications, or otherwise benefit consumers. In such cases, the Commission must establish that the agreement has the object or effect of substantially preventing, restricting, or lessening competition; proof of actual effects is not invariably required when the prohibited object is established.

Non-per-se agreements under Sec. 14 (b) and (c)⁷ require assessment of whether they have the object or effect of substantially preventing, restricting, or lessening competition; Sec. 14 (c) also contains a proviso concerning efficiencies and consumer benefits. Abuse of dominance is governed by Section 15⁸.

Note: Sec. 14 (c) covers agreements other than those specified in Sec. 14 (a) and (b) that have the object or effect of substantially preventing, restricting, or lessening competition, subject to its statutory proviso.

Note: Since Section 14 (a) and (b) requires that the entities be “competitors,” the entities covered by the single economic entity doctrine cannot commit any violation under said subsections. Section 14(c), however, captures agreements between entities that are not competitors; hence, it may be violated by single economic entities.