2. Abuse of Dominant Position

B. Abuse of Dominant Position – R.A. No. 10667, Section 15

> Section 15. Abuse of Dominant Position. –¹ 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: (a) Selling goods or services below cost with the object of driving competition out of the relevant market: Provided, That in the Commission’s evaluation of this fact, 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; (b) 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; (c) 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; (d) 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: Provided, That the following shall be considered permissible price differentials: (1) Socialized pricing for the less fortunate sector of the economy; (2) 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; (3) 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 (4) Price changes in response to changing market conditions, marketability of goods or services, or volume; (e) 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 fixing prices, giving preferential discounts or rebate upon such price, or imposing conditions not to deal with competing entities, where the object or effect of the restrictions is to prevent, restrict or lessen competition substantially: Provided, That nothing contained in this Act shall prohibit or render unlawful: (1) Permissible franchising, licensing, exclusive merchandising or exclusive distributorship agreements such as those which give each party the right to unilaterally terminate the agreement; or (2) Agreements protecting intellectual property rights, confidential information, or trade secrets; (f) 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; (g) 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; (h) 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; and (i) 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 this Act: Provided, That nothing in this Act 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: Provided, further, That 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: Provided, finally, That the foregoing shall not constrain the Commission or the relevant regulator from pursuing measures that would promote fair competition or more competition as provided in this Act.

Abuse of Dominant Position

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,

Elements of Abuse of Dominant Position

• The entity must have market power;
• The entity commits abusive conduct;
• The conduct would substantially prevent, restrict, or lessen competition in the relevant market;
• There is no objective justification for the conduct.

Forms of Abuse of Dominant Position

Under Section 15 of Republic Act No. 10667², entities are prohibited from abusing their dominant position by engaging in conduct that substantially prevents, restricts, or lessens competition, including:

• Predatory Pricing (Sec. 15): Selling goods or services below cost to drive competitors out of the relevant market. In evaluating this, the Philippine Competition Commission (PCC) must consider if the entity had no such predatory intent and established the price in good faith to meet or compete with a competitor's lower price for an identical or comparable product or service of similar quality in the same market.
• Imposing Barriers to Entry (Sec. 15): Setting up barriers to entry or performing acts that prevent competitors from growing within the market in an anti-competitive manner.
  • Exception: Barriers or growth limitations resulting from a superior product or process, business acumen, or legal rights and laws (Sec. 15).
  • Elements:
    • The entity holds a dominant position in the relevant market;
    • It establishes barriers to entry or carries out acts preventing competitors from growing within the relevant market;
    • The conduct produces a foreclosure effect on competition; and
    • The barrier is not the natural and necessary outcome of the entity's superior product or process, business acumen, or legal rights and laws.
• Tying (Sec. 15): Conditioning a transaction on the other party's acceptance of supplementary obligations that, by their nature or according to commercial usage, have no connection with the subject of the transaction.
  • Elements:
    • The entity possesses a dominant position in the relevant market;
    • It conditions a transaction on accepting other obligations unrelated to the primary transaction;
    • The action leads to a foreclosure effect; and
    • The entity lacks an objective justification for the practice.
• Bundling (Sec. 15): Conditioning the supply of a primary product or service on the customer's purchase of separate, unrelated goods or services from the supplier.
  • Elements:
    • The entity possesses a dominant position in the relevant market;
    • There are at least two distinct products;
    • The products have no direct connection to each other;
    • Obtaining the primary product is contingent upon purchasing the secondary product; and
    • The practice has an anti-competitive foreclosure effect.
• Price Discrimination (Sec. 15): Imposing prices, terms, or conditions that unreasonably discriminate among customers or sellers of identical goods or services who are trading contemporaneously under similar terms, where the effect is to substantially lessen competition.
  • Permissible Price Differentials (Sec. 15):
    • Socialized pricing schemes targeted at less fortunate sectors of the economy;
    • Price differences reasonably or approximately reflecting variations in the cost of manufacture, sale, or delivery stemming from differing methods, technical conditions, or quantities involved;
    • Price differences or sales terms extended in response to competitive prices, services, or facility changes supplied by a competitor; and
    • Price adjustments made in response to shifting market conditions, volume variations, or the marketability of the goods or services.
  • Elements:
    • The entity holds a dominant position in the relevant market;
    • The entity treats customers or sellers of the same products differently;
    • The discrimination involves prices, terms, or conditions among parties trading contemporaneously under similar terms and conditions;
    • No legitimate justification exists for the difference;
    • The discrimination has a reasonable probability of substantially preventing, restricting, or lessening competition; and
    • The practice does not fall under any block exemptions.
• Exclusive Dealing (Sec. 15): Enforcing restrictions in leases or sales contracts regarding where, to whom, or in what form goods or services may be traded (such as fixing prices, granting preferential discounts or rebates, or demanding that buyers not deal with competitors), where the purpose or effect is to substantially prevent, restrict, or lessen competition.
  • Statutory Exclusions (Sec. 15): Section 15(e) does not prohibit permissible:
    • Valid franchising, licensing, exclusive merchandising, or exclusive distributorship agreements, including those giving each party the right to unilaterally terminate the agreement; or
    • Agreements aimed at protecting intellectual property rights, confidential information, or trade secrets.
  • Elements:
    • The entity maintains a dominant position in the relevant market;
    • It imposes restrictions in a lease or contract of sale regarding the location, customers, or form of trade;
    • The restrictions concern where, to whom, or in what forms goods or services may be sold or traded; price fixing and preferential discounts or rebates are statutory examples;
    • The restrictions generate anti-competitive effects;
    • The conduct is not covered by block exemptions; and
    • The entity possesses no objective justification for the conduct.
• Unfair Purchase Pricing (Sec. 15): Directly or indirectly imposing unfairly low purchase prices on marginalized agricultural producers, fisherfolk, micro, small, and medium enterprises (MSMEs), and other marginalized producers and service providers.
  • Elements:
    • The entity maintains a dominant position in the relevant market;
    • It directly or indirectly imposes unfairly low purchase prices on protected marginalized entities; and
    • The conduct would substantially prevent, restrict, or lessen competition.

The following conducts may not necessarily be considered an abuse of dominant position:

• Those which contribute to improving production or distribution of goods or services within the relevant market or to promoting technical and economic progress, while allowing consumers a fair share of the resulting benefit. (Sec.15)³

Abuse of Dominant Position

Summary of Exceptions and Conditions