I OVERVIEW OF RECENT PRIVATE ANTITRUST LITIGATION ACTIVITY
For more than 75 years, the Philippines has been without a comprehensive antitrust law. Instead, the adverse consequences of anticompetitive conduct have been addressed through isolated provisions scattered across various pieces of general legislation including the Revised Penal Code of 1930.2 Indeed, despite the clear state policy against combinations in restraint of trade or unfair competition3 and the mandate to ‘protect Filipino enterprises against unfair competition and trade practices’4 in the 1987 Philippine Constitution, more than 25 years lapsed before the Philippine Congress passed a special antitrust statute aimed at consolidating the state’s competition legislation.
In June 2015, the Philippine Congress enacted the Philippine Competition Act (the Competition Act). Citing the need to level the playing field for investors and driven by foreign and domestic business groups, the Competition Act was endorsed to the Philippine President as a priority bill and finally signed into law on 21 July 2015.5 Almost a year later, on 31 May 2016, the implementing rules and regulations (IRR) of the Competition Act were signed, adopted and promulgated by the Philippine Competition Commission (PCC).
Like other models of antitrust legislation, the Competition Act covers not only acts of any person or entity engaged in any trade, industry, and commerce in the Philippines but explicitly authorises its extraterritorial application. Thus, the Competition Act will be enforced even against acts in international trade provided the same have direct, substantial, and reasonably foreseeable effects in trade, industry or commerce in the Philippines.
The new Philippine antitrust law identifies prohibited anticompetitive agreements.6 Proscribed as illegal are agreements, between and among competitors, (1) restricting competition as to price or components thereof, or other terms of trade and (2) fixing prices at auctions or in any form of bidding.7 Moreover, agreements between and among competitors setting, limiting, or controlling production, markets, technical development, or investments and through dividing or sharing the market are deemed violative of the Competition Act if these ‘have the object or effect of substantially preventing, restricting, or lessening competition’.8 All other agreements between or among competitors, which have anticompetitive effects, are also prohibited unless the same ‘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’.9
To implement this legislation, the Competition Act creates the PCC, an independent quasi-judicial body attached to the Office of the President of the Philippines.12 Established in February 2016, the PCC will act as a central body to police anticompetitive practices. The PCC is conferred with original and primary jurisdiction over the enforcement and implementation of the Competition Act13 and is, thus, empowered to investigate violations thereof and other existing competition laws motu proprio or upon receipt of a verified complaint.14 Significantly, included among its various powers is the authority of the PCC to conduct administrative proceedings15 as well as institute appropriate civil or criminal proceedings.16 To give teeth to the PCC’s authority, the Competition Act expressly empowers the PCC to issue subpoena duces tecum and subpoena ad testificandum requiring the production of books, records or other documents or data; to summon witnesses; to issue interim orders such as show cause and cease and desist orders; and to deputise any and all government enforcement agencies or enlist the aid and support of any private institution, corporation, entity or association. In addition, the Competition Act recognises the continued existence of the Office for Competition under the Department of Justice (DOJ-OFC),17 albeit with the limited power and jurisdiction of conducting preliminary investigation and undertaking the prosecution of all criminal offences arising under the Competition Act and other competition related laws.18
In relation to its power to conduct administrative proceedings and institute civil or criminal suits arising from the violation of the Competition Act, the PCC is conferred with the sole and exclusive authority to initiate and conduct a fact-finding or preliminary inquiry into compliance with the provisions of the Competition Act.19 The inquiry may be initiated by the PCC at its own initiative, upon the filing of a verified complaint by an interested party, or upon referral by a regulatory agency.20 After due notice and hearing and on the basis of facts and evidence presented, the PCC may issue a cease and desist order against the respondent entity.21
Ultimately, the PCC will conclude its inquiry by either issuing a resolution (a) ordering the closure of the inquiry if no violation or infringement is found or (b) proceeding, on the basis of reasonable grounds, to the full administrative investigation.22 Where warranted by the evidence, the PCC may also file a criminal complaint with the Department of Justice (DOJ).23
The law requires the PCC to complete its preliminary inquiry, in all cases, within 90 days reckoned from submission of the verified complaint, referral or date of initiation by the PCC.24 Though drafted in mandatory terms, the Competition Act does not prescribe the consequences for the PCC’s failure to complete the preliminary inquiry stage within the stated period.
The initiation, conduct, and termination of the preliminary inquiry of the PCC are significant milestones in private enforcement litigation because, by express provision of the Competition Act, no independent civil action for violation of the Competition Act may be instituted in court by a private party until the PCC has completed its preliminary inquiry.25 The lack of sanctions for the PCC’s failure to complete its preliminary inquiry within the prescribed 90-day period and the absence of any clear suspensive or tolling effect of such inquiry on the statute of limitations to commence a civil suit adversely impact on the private enforcement of the Competition Act. Significantly, the Competition Act authorises the PCC to institute civil suits.26 Unfortunately, the law does not prescribe the requirements for, as well as the procedure leading to, such civil action on the part of the PCC. Indeed, it fails to even state what relief the PCC would be entitled to demand in such civil suits.
In addition to administrative fines, the PCC may, upon finding that an entity has entered into an anticompetitive agreement or has abused its dominant position, provide redress for such anticompetitive conduct by issuing injunctions; requiring adjustment, divestment or corporate reorganisation; and directing the disgorgement of excess profits under such reasonable parameters to be prescribed in the law’s implementing rules and regulations.27
Violation of the Competition Act may also expose the erring persons to civil liability to private persons injured by reason thereof.28 On the issue of private rights and remedies, the Competition Act contains a singular provision – Section 45 – which authorises the filing of an independent civil action arising from violations of the Competition Act but only after the preliminary inquiry conducted by the PCC has been completed. Significantly, although the said section does not specifically recognise the continuing availability of other causes of action to private parties seeking redress for anticompetitive conduct, the entire Competition Act repeatedly refers to ‘other existing competition laws’29 and ‘other competition related laws’,30 which phrases implicitly acknowledge that there are statutes, other than the Competition Act, from which legal rights may spring and under which redress in damages and other relief may be obtained.
As the Competition Act has just recently been passed, there has been no occasion for Philippine courts to interpret the same. It is expected that the passage of the Competition Act and the recent coming into effect of its IRR31 will result in an increase in antitrust litigation – both public and private. However, it is only when the provisions of the Competition Act are clarified through more specific and detailed implementing rules and regulations32 and interpreted by the courts, particularly the Supreme Court, that the parameters of private enforcement suits within the Competition Act will be clearly delineated.
II GENERAL INTRODUCTION TO THE LEGISLATIVE FRAMEWORK FOR PRIVATE ANTITRUST ENFORCEMENT
Even before the Competition Act, civil suits for damages arising from anticompetitive conduct, though infrequent, were commenced in the Philippines. These suits have mostly centred on the enforcement of non-compete clauses in contractual agreements. Jurisprudence shows that the validity and enforceability of non-compete provisions in employment and service contracts have been litigated in the Philippines since the early 1900s. In resolving against objections that such non-compete clauses constitute an undue restraint of trade, the Supreme Court has relied on general principles of Philippine contract law as provided in the Civil Code of the Philippines (the Civil Code)33 (including the freedom of the parties to enter into contractual stipulations that are not contrary to law, morals, good customs, public order or public policy)34 and basic fairness.
In addition, civil actions for damages arising from unfair trade practices and other acts of unfair competition have been commenced and maintained on the basis of Article 28 of the Civil Code, which states: ‘Unfair competition in agricultural, commercial or industrial enterprises or in labour through the use of force, intimidation, deceit, machination or any other unjust, oppressive or high-handed method shall give rise to a right of action by the person who thereby suffers damage.’
Explaining its appropriate application, the Supreme Court stated that what is prevented under Article 28 of the Civil Code is ‘not competition per se but the use of unjust, oppressive or high-handed methods which may deprive others of a fair chance to engage in business or to earn a living. Plainly, what the law prohibits is unfair competition and not competition where the means used are fair and legitimate.’35 To be able to recover damages under Article 28 of the Civil Code, the following requirements must be met: (1) ‘it must involve an injury to a competitor or trade rival’, and (2) ‘it must involve acts which are characterised as “contrary to good conscience”, or “shocking to judicial sensibilities”, or otherwise unlawful.’36 Faced with the following conduct – the defendant suddenly shifting his or her business from manufacturing kitchenware to plastic-made automotive parts, the plaintiff’s line of business; luring the plaintiff’s employees to transfer to his or her employ; trying to discover the plaintiff’s trade secrets; deliberately copying the plaintiff’s products; and even selling those products to the plaintiff’s customers – the Supreme Court, in 2014, affirmed that the defendant engaged in unfair competition for which the plaintiff was entitled to recover damages and attorneys’ fees.37
As such, in the absence of an antitrust statute, Article 28 of the Civil Code has been the cornerstone of private antitrust enforcement litigation where the dispute is between competitors. Where the action is between parties who are not competitors or trade rivals and no other special law applies, the civil case may generally be brought under Articles 19,38 2039 and 2140 of the Civil Code. Together with Article 28, Articles 19, 20 and 21 of the Civil Code all form part of the ‘Human Relations’ chapter of the Civil Code.
Admittedly, the Competition Act was meant to consolidate, to the extent possible, all competition-related laws and, for that reason, expressly repealed an array of Philippine laws including Article 186 of the Revised Penal Code, which prohibits monopolies or combinations in restraint in trade.41 As a catch-all, the Competition Act repeals ‘all other laws, decrees, executive orders and regulations, or part or parts thereof inconsistent with’ any of its provisions.42
The Competition Act does not expressly repeal Article 28 of the Civil Code. Considering that Article 28 and the rest of the ‘Human Relations’ chapter of the Civil Code are not inconsistent with, much less repugnant to, the provisions of the new competition law, these provisions continue to exist and to be available as bases for redress, notwithstanding the Competition Act. Hence, one may take the view that an injured individual may still file a civil complaint for damages against a defendant under these general provisions of the Civil Code.
Indeed, it is possible that private damage actions premised on, among others, Article 28 of the Civil Code may continue to be instituted, despite the passage of the Competition Act, especially because of the express prohibition against commencing an independent civil action for violation of the Competition Act until the preliminary inquiry conducted by the PCC under Section 31 is terminated. Should the conduct complained about not be within the purview of the PCC, however, there appears to be nothing that legally bars private parties from instituting independent civil suits for damages arising from anticompetitive behaviour.
Any action arising from a violation of any penal provision of the Competition Act shall be barred unless commenced within five years from the time the criminal violation is discovered by the offended party, the authorities or their agents.43 With respect to administrative and civil actions, the five-year prescriptive period runs from the time the cause of action accrues,44 which is when the anticompetitive conduct that caused the alleged damage or injury occurred.
On the other hand, the separate civil action under Articles 19, 20, 21 or 28 of the Civil Code, which is akin to a tort under the Philippine legal system, prescribes within four years from the time the cause of action accrues.45
As mentioned earlier, the institution of an independent civil action arising from a violation of the provisions of the Competition Act is prohibited until the PCC has terminated its preliminary inquiry into the conduct of the allegedly erring person or entity. Significantly, the preclusive effect appears to be limited to civil actions founded on violations of the Competition Act and, thus, seemingly excludes civil actions brought under other laws including the Civil Code. However, there is basis to argue that the period to file any civil case for damages arising from anticompetitive conduct, even if premised under Article 28 of the Civil Code, is suspended when the PCC is already conducting a preliminary inquiry into whether the acts of the allegedly erring person are anticompetitive and, thus, constitute unfair competition. In GMA Network, Inc v. ABS-CBN Broadcasting Corporation, et al.,46 the Supreme Court sustained the dismissal of a complaint for damages premised on unfair competition on the ground that it failed to state a cause of action. The complaint of GMA Network, Inc (GMA) alleges that the defendants took advantage of their common control and ownership and thereby arbitrarily re-channelled GMA’s cable television broadcast on 1 February 2003, caused distortions to its signal transmission, reduced the quality of its programmes and thereby caused business interruptions to, and injured the operations of, GMA.47 In sustaining the dismissal of the complaint, the Supreme Court ruled that the issues of whether the conduct of the defendant cable companies had been committed and were unfairly done were within the primary jurisdiction of the National Telecommunications Communication, before which a similar complaint, also filed by GMA, was pending.48 In applying the doctrine of primary jurisdiction to dismiss the damage suit, the Supreme Court held that the questions underlying an award of damages entail specialised knowledge in the fields of communications technology and engineering, which courts do not possess.49 Thus, though regular courts have jurisdiction over actions for damages, per the Supreme Court, it would nonetheless be proper for the courts to yield their jurisdiction in favour of an administrative body with specialised expertise.50
The doctrine laid down in GMA Network, Inc v. ABS-CBN Broadcasting Corporation, et al. may be applied to civil actions for damages grounded on the Civil Code, including Article 28 on unfair competition, and filed even before the preliminary inquiry of the PCC has been terminated. The PCC being the exclusive agency statutorily tasked to police anticompetitive conduct, the doctrine of primary jurisdiction may readily be invoked to dismiss such civil actions.
From a criminal law perspective, the Philippines adheres to the territoriality principle51 such that its penal laws are generally enforced only within its territory.52 From a civil law perspective, it is possible for a person found in the Philippines to file a case against another entity or person outside the country, even for acts committed abroad. The plaintiff is only required to prove that he or she has a right, such right was violated by the defendant, and he or she incurred damages by reason of the violation, the place of the commission of the violation being a non-issue. Acquiring jurisdiction over a defendant abroad or enforcing a Philippine judgment against him or her may pose certain challenges.
The Competition Act expressly prescribes the extraterritorial effect of its provisions. Thus, the Competition Act is made applicable (and enforceable) to international trade including acts done outside the country provided they have ‘direct, substantial, and reasonably foreseeable effects in trade, industry or commerce in the Philippines’.53 Accordingly, wrongful acts done outside the Philippines would be considered violations of the Competition Act and, thus, actionable, whether criminally or civilly, if the effects of such acts are manifested or experienced within the Philippines.
As the Competition Act was signed into law only in July 2015, the parameters of the extraterritorial application of the Competition Act and the practical implementation of such extraterritoriality have not yet been clarified. And while the IRR reaffirmed the extraterritorial application of the law,54 they do not provide the much-needed elaboration on the extraterritorial scope of the Competition Act, a concept that deviates from the general territorial concept of Philippine penal laws.
For private enforcement action under the Competition Act, any person who suffers direct injury by reason of any violation of said law may institute a separate and independent civil action.55 Similarly, the provisions of the Civil Code, including Article 28 thereof, vest the right of action on the person who suffers damage by reason of the act complained about. The statutory requirement that the plaintiff be the party directly injured is consistent with the provisions of the Rules of Court, which require that a civil action be prosecuted in the name of a real party in interest.56 A real party in interest is defined as ‘the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit’.57 Per the Supreme Court, the interest contemplated by the Rules of Court is ‘material interest or an interest in issue to be affected by the decree or judgment of the case, as distinguished from mere curiosity about the question involved.’58 A case that is not prosecuted by a real party in interest is dismissible.59
The requirement of locus standi of a party plaintiff has been relaxed by the Supreme Court60 in exceptional cases such as where the case raises an issue of transcendental significance or paramount importance to the people; where it advances constitutional issues which deserve the attention of the High Court in view of their seriousness, novelty and weight as precedents; or where to do so would achieve substantial justice.
Although the prohibition of anticompetitive conduct and the consequent promotion of free and fair competition are significant state policies, it is doubtful that a plaintiff’s lack of legal standing in a civil case for damages would be excused as an exception to the general rule.
V THE PROCESS OF DISCOVERY
The Rules of Court set out rules on discovery, which are available in any civil proceeding. The recognised discovery modes include:
i Deposition pending action61
Provided there is leave of court after jurisdiction has been obtained over any defendant or over property which is the subject of the action, or even without such leave as long as an answer has already been served, the testimony of any person, whether a party or not, may be taken, at the instance of any party, by deposition upon oral examination or written interrogatories.62 The attendance of such witnesses at the deposition may be compelled by the use of a subpoena.63 As to the scope of examination, the deponent may be examined regarding any matter, not privileged, which is relevant to the subject of the pending action.64
ii Interrogatories to parties65
Under the same conditions as the foregoing, a party desiring to elicit material and relevant facts from any adverse party may do so by filing in court and serving upon the adverse party written interrogatories to be answered by the party served.66 The scope of written interrogatories is the same as depositions pending action.67
iii Written request for admission68
At any time after issues have been joined, a party may file and serve upon any other party a written request for the admission by the latter of (1) the genuineness of any material and relevant document described in and exhibited with the request, or (2) the truth of any material and relevant matter of fact set forth in the request.69 Unless otherwise allowed by the court, ‘a party who fails to file and serve a request for admission on the adverse party of material and relevant facts at issue which are, or ought to be, within the personal knowledge of the latter, shall not be permitted to present evidence on such facts.’70
iv Production or inspection of documents or things71
Upon motion of any party showing good cause therefor, the court in which an action is pending may (1) order any party to produce and permit the inspection and copying or photographing, by or on behalf of the moving party, of any designated documents, papers, books, accounts, letters, photographs, objects or tangible things, not privileged, which constitute or contain evidence material to any matter involved in the action and which are in his or her possession, custody or control, or (2) order any party to permit entry upon designated land or other property in his or her possession or control for the purpose of inspecting, measuring, surveying, or photographing the property or any designated relevant object or operation thereon.72
v Deposition before action73
Even before a court case is commenced, a person who wishes to perpetuate his or her own testimony or that of another person regarding any matter that may be cognisable in any court of the Philippines may file a verified petition in the court for such purpose.74 In such petition, which shall be served on all identified potential adverse parties, the petitioning party must state, among others, the facts which he or she desires to establish by the proposed testimony and his or her reasons for desiring to perpetuate it.75
The foregoing modes of discovery are devices (1) to narrow and clarify the basic issues between the parties, and (2) for ascertaining the facts relative to those issues,76 including those known to one’s adversaries. Per jurisprudence, the main purposes of discovery are to enable the parties to obtain the fullest possible knowledge of the issues and facts and thus prevent trials from being carried on in the dark, subject, of course, to recognised privileges,77 and to enable a party to discover the evidence of the adverse party and thus facilitate an amicable settlement or expedite the trial of the case.78 Accordingly, it is well-settled that an objection that the discovery motion is a ‘fishing expedition’ is no longer a reason to prevent a party from inquiring into the facts underlying the opposing party’s case through the discovery procedures.79
VI USE OF EXPERTS
There is a dearth of jurisprudence on the use of experts and economists to establish the existence of anticompetitive conduct or to prove the existence, and extent, of damages. In acknowledgment of the need for experts in resolving antitrust issues, the Competition Act expressly authorises the PCC to commission consultants or experts in connection with an investigation.80
The Rules of Court authorise the admission of expert opinions – that is, opinions of a witness on a matter requiring special knowledge, skills, experience or training, which he or she is shown to possess.81 And courts have relied on testimony of actuaries as proof, for example, of the actual loss of a deceased’s person earning capacity.
Jurisprudence on Article 28 of the Civil Code, however, does not involve testimonies of experts and economists. Rather, the commission of acts amounting to unfair competition has been attested to by fact witnesses, persons with personal knowledge of the plaintiff’s business and the defendant’s unlawful conduct. For private enforcement under the Competition Act, it is highly likely that experts and economists will have to be engaged to provide, among others, evidence on what is the relevant market, whether a particular player has a dominant position in such market and the impact of the alleged conduct on such market.
VII CLASS ACTIONS
In the Philippines, when the subject matter of the controversy is one of common or general interest to many persons so numerous that it is impracticable to join all as parties, a number of them sufficiently numerous and representative as to fully protect the interests of all concerned may sue or defend for the benefit of all.82 In class actions, any party in interest shall have the right to intervene to protect his or her individual interest.
A class action is beneficial as it creates an impression that the effects of defendant’s anticompetitive conduct are pervasive, impacting more than just one individual, which may influence the quasi-judicial officer or the judge hearing the case to rule against the defendant. Moreover, this may give the plaintiffs the opportunity to claim substantial, if not the maximum, amount of actual damages including exemplary damages as a matter of public good. Finally, prosecuting a damages case as a class action spreads the potentially substantial costs and expenses (especially where experts are engaged) across all said plaintiffs and, thus, affords litigants without resources an opportunity to recover damages when they would not have had the capacity to initiate the suit.
The downside to class actions is that they are difficult to commence and maintain due to the strict requirements for their propriety – community of interest, substantially numerous class membership and adequacy of representation.
In one case, the Supreme Court affirmed the dismissal of a class action brought by several stockholders arising from an alleged violation of their pre-emptive rights because the damage suffered by the complaining stockholders is limited to their respective proportion of the unsubscribed shares and not to that portion corresponding to the shares of the other stockholders. Thus, the wrong suffered by each of them would constitute a wrong separate from those suffered by the other stockholders and, thus, would not create the required common or general interest in the subject matter.83 Following the foregoing, it is possible that the courts would opine that, in certain instances, class actions are not permissible insofar as anticompetitive conduct is concerned because an injury suffered by some consumers or competitors may not necessarily be the same as the injury sustained or to be sustained by the others in the same class. In addition, a class action suit may be dismissed more easily as all it takes is one disagreeable member of that class. The Supreme Court has ruled that a class action will not prosper if there is a conflict of interest or opinion between those represented and those who filed the action.84
VIII CALCULATING DAMAGES
A violation of the Competition Act or an act of unfair competition under Article 28 of the Civil Code renders the defendant liable for ‘all damages which are the natural and probable consequences of the act or omission complained of’, whether such damages have been foreseen or could have reasonably been foreseen by the defendant.85 As to what types of damages are recoverable, neither the Competition Act nor Article 28 of the Civil Code specifies. Thus, the general provisions of the Civil Code, which enumerates the types of damages that may be awarded by a court given a set of facts and which specifies instances when court fees, legal costs and other litigation expenses may be recovered, find application.
Under the Civil Code, among the damages recoverable, if proven by sufficient evidence, are actual, moral, nominal, temperate or moderate, or exemplary or corrective. Actual damages, which are awarded only when duly proved,86 comprehend not only the value of the pecuniary loss suffered but also the profits that the plaintiff failed to obtain.87 Attorneys’ fees and litigation expenses are recoverable as actual damages and may be awarded in reasonable amounts88 under certain circumstances including when the case is a separate civil action to recover civil liability arising from a crime.89
On the other hand, for moral, nominal, temperate, or exemplary damages, no proof of pecuniary loss is necessary for these to be awarded. The assessment of such damages is left to the discretion of the court, according to the circumstances of each case.90
Moral damages compensate the injured party for physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury91 that are the proximate result of the defendant’s wrongful act or omission.92 Moral damages are expressly recoverable in Article 28 unfair competition litigation.
Nominal damages are awarded to vindicate or recognise a right of the injured party, which has been violated, and not to indemnify him or her for any loss suffered.93 In one Article 28 unfair competition case that was resolved by the Supreme Court in 2014, an award of nominal damages (in the amount of around US$4,400) was granted in recognition and vindication of the violation of the plaintiff’s rights and in view of its failure to quantify its losses arising from the defendant’s acts of unfair competition (initially alleged as around US$44,000).94 Temperate damages may be granted when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty.95 An award of nominal damages precludes the recovery of temperate damages.96
Lastly, the Civil Code authorises courts to award exemplary damages, which are imposed in addition to moral, temperate, liquidated or compensatory damages, by way of example or correction for the public good.97 Exemplary damages are not a matter of right but left to the discretion of the court.98
Significantly, in 1917, the Philippine Legislature enacted Act No. 3247, entitled ‘An Act to Prohibit Monopolies and Combinations in Restraint of Trade’, which authorises an award of treble damages and reasonable attorneys’ fees as civil liability99 arising from the prohibited anticompetitive behaviour therein penalised (such as entering into price-fixing agreements or employing monopolies to restrain free competition). Sections 1, 2, 3 and 5 of Act No. 3247, which defined the prohibited acts thereunder, were expressly repealed by the Revised Penal Code.100 The acts prohibited by Act No. 3247 were, however, restated in Article 186 of the Revised Penal Code. The Competition Act expressly repeals Article 186 of the Revised Penal Code, but essentially restates the prohibited anticompetitive acts thereunder.101 Section 6 of Act No. 3247, on the availability of treble damages, has never been expressly repealed and does not appear to be inconsistent with any of the provisions of the Revised Penal Code or the Competition Act. Thus, unless clarified by the Supreme Court or the legislature to the contrary, a private litigant may arguably assert a right, under Act No. 3247, to treble damages and reasonable attorneys’ fees for a violation of the provisions of the Competition Act.
Section 6 of Act No. 3247, however, has not been interpreted by the courts to date.
IX PASS-ON DEFENCES
The concept of pass-on defences has not been recognised by the Competition Act. Moreover, there is no law, rule or jurisprudence in the Philippines which provides that damages suffered by a purchaser, and thereby the damages he or she is entitled to claim, by reason of an overprice of a cartelised product, are reduced or mitigated if he or she ‘passes on’ some of the overcharge to his or her own customers. Notably, however, an award of actual damages is intended to compensate the plaintiff for pecuniary loss actually suffered by him or her as he or she has duly proved102 and covers any profits that he or she had failed to obtain.103 Thus, it is theoretically possible for any defendant to raise the pass-on defence to disprove the actual amount of losses that the plaintiff has suffered. Significantly, however, every plaintiff under Philippine law is duty-bound to exercise the diligence of a good father of a family to minimise the damages resulting from the act complained of.104 Hence, any passing on of the overcharge may be asserted as legally justified. Whether courts should take such passing on into account and thereby reduce the damages recoverable by the plaintiff is an undecided issue.
X FOLLOW-ON LITIGATION
With the Competition Act having been signed into law only in 2015 and its IRR taking effect only in June 2016, follow-on antitrust litigation has yet to materialise. Instead, private damage suits arising from anticompetitive conduct have heretofore been stand-alone civil litigation, wherein the parties solely rely, and the courts review and decide based on the parties’ respective evidence and the applicable law. Given that an independent civil action for violation of the Competition Act may not be instituted by a private injured party until the PCC has terminated its preliminary inquiry,105 it is highly likely that there will be a surge in follow-on litigation especially where the PCC has, after the termination of the preliminary inquiry or the completion of an administrative proceeding, determined that there is substantial evidence to conclude that the defendant has engaged in prohibited, if not criminal, anticompetitive conduct that violates the Competition Act. Significantly, the said competition law does not expressly bar the filing of a private damage suit in cases where the PCC has determined that the defendant has not engaged in any anticompetitive conduct. However, in view of the specialised know-how of the PCC, it is likely that the findings of the PCC, adverse to the defendant or otherwise, will be given great weight by the courts.
The Competition Act fails to provide for the tolling of the five-year prescriptive period during the PCC’s preliminary inquiry, which is supposed to be completed within 90 days. With the silence of the Competition Act, private injured parties must guard against prescription from barring any cause of action. As an Article 28 unfair competition case must be filed within four years from the time the cause of action accrues, should the PCC not yet terminate its preliminary inquiry, the plaintiff would have to decide whether to file an Article 28 unfair competition case in court or wait for the PCC to close its preliminary inquiry and be limited to a civil case founded on the Competition Act.
Note must also be taken of Section 35 of the Competition Act, which mandates the PCC to develop a leniency programme, the objective of which is to extend leniency to participants in an anticompetitive agreement that voluntarily disclose information to the PCC. The leniency that may be extended, subject to compliance with certain requirements, ranges from ‘the immunity from any suit or charge of affected parties and third parties, exemption, waiver, or gradation of fines and/or penalties’.106 Such immunity may be granted prior to or during the fact-finding or preliminary inquiry proceedings by the PCC. The DOJ-OFC may likewise grant immunity or leniency in the event that there is already a preliminary investigation for a criminal offence pending before it. However, while the Competition Act already provided for the conditions under which immunity from suit may be granted, the PCC has yet to develop the mandated leniency programme as the recently promulgated IRR is silent on the matter.
The Philippines strictly enforces the attorney–client privilege, particularly the lawyer’s duty to maintain inviolate client confidences, which is mandated in the Code of Professional Responsibility.107 Recognising this duty, the Rules of Court provide that an attorney cannot, without the consent of his or her client, be examined as to any communication made by the client to him or her, or his or her 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 or her employer, concerning any fact the knowledge of which has been acquired in such capacity.108 In the Philippines, an attorney who divulges the secrets of his or her clients may be subjected to disciplinary sanctions and possibly criminal penalties. The attorney–client privilege extends to any work product that the lawyer has provided his or her client and which the client and lawyer intended to remain confidential. The privilege, however, applies only to communication between the client and his or her counsel concerning a crime already committed and not one which the client intends to commit in the future.109 This privilege may be raised to oppose a compulsory process issued by the PCC in the course of its preliminary inquiry as well as discovery measures in private enforcement litigation.
The Code of Professional Responsibility and the Rules of Court fail to distinguish between private practitioners and in-house lawyers. Moreover, the Supreme Court has not had the occasion to rule on the extent that an in-house lawyer may invoke the attorney–client privilege to prevent disclosure or discovery. Nevertheless, the Supreme Court has acknowledged that being a corporate lawyer (or an in-house counsel) constitutes the practice of law.110 Thus, it should necessarily follow that the ethical obligations in the Code of Professional Responsibility are similarly imposed on in-house lawyers.
Insofar as confidential documents and/or business information submitted by an entity to the PCC in the course of a preliminary inquiry or an investigation, the Competition Act states that the same shall not, in any manner, be directly or indirectly disclosed, published, transferred, copied or disseminated, unless the entity consents to the disclosure, the document or information is mandatorily required to be disclosed by law or by a valid order of a court or of a government or regulatory agency.111 Thus, should a court in a private antitrust suit order the production of the submitted documents, it appears that the PCC may disclose the same, whether or not the same was privileged in nature before its submission. Significantly, facts, data and information supplied in connection with a binding ruling, show cause order or a consent order as well as all admissions made, documents filed and evidence presented shall not be admissible as evidence in any criminal proceeding arising from the same act subject of the binding ruling, show cause order or consent order.112 A plea of nolo contendere cannot be used against the defendant entity to prove liability in a civil suit arising from the criminal action nor in another cause of action.113
Significantly, Rule 4, Section 13 of the IRR of the Competition Act specifically provides for the treatment of confidential information submitted in the course of the notification and review process of a covered merger or acquisition. The said rule requires the party or entity submitting the information to clearly identify any material that it considers to be confidential, provide a justification for the request of confidential treatment of the information supplied and the time period within which confidentiality is requested, as well as to provide a separate non-confidential version thereof. In the event the PCC deems that the justification for confidential treatment provided by the entity or party is insufficient or not grounded, the PCC may decide to make the information accessible. It is noteworthy that the IRR does not provide for similar rules on confidentiality in any other proceedings before it. Nevertheless, considering the wording of Section 34 of the Competition Act (i.e., confidential treatment of ‘confidential business information’), the PCC may insist that, in all proceedings before it, it has the authority to determine whether a particular information is confidential in nature or not. In this regard, it is relevant to note that the Competition Act imposes a fine for any violation of the confidentiality rule,114 and the officers of the PCC – including the chairperson, the commissioners, or any of its staff – may be penalised thereunder if the violation of the confidentiality rule results from any act or omission done in evident bad faith or gross negligence.115
XII SETTLEMENT PROCEDURES
Private actions for damages, whether for antitrust claims or otherwise, are generally allowed to be settled.116 In addition, civil liability arising from an offence may also be compromised, but the same shall not extinguish the public action for the imposition of a legal penalty.117 The Competition Act itself does not prevent private parties from entering into any settlement of their antitrust dispute. The Supreme Court has adopted a policy encouraging private settlements and, towards this end, mandates that all civil cases (except those that cannot be compromised) be referred to the Philippine Mediation Center for court-annexed mediation (CAM) as part of the pretrial process.118 Should mediation fail, then the parties would be required to go through what is called ‘judicial dispute resolution’ (JDR), which effectively serves as a secondary tier of ‘mediation’ conducted by the trial judge.119 Should a settlement be reached, whether in mediation or JDR, the compromise agreement may be submitted to the court for approval and for issuance of a decision based thereon. The decision based on the compromise agreement is immediately final and executory120 and, if not performed, may be enforced like a court judgment.121 Under the provisions of Republic Act No. 9285 (or the ADR Act)122 and Supreme Court issuances, the mediation proceedings are considered strictly confidential and, thus, information or evidence obtained through mediation proceedings shall not be subject to discovery and shall be inadmissible in any adversarial proceeding (unless such evidence or information was otherwise admissible or discoverable prior to their submission in the mediation).123
Though settlements under CAM and JDR are pursuant to processes mandated by the Supreme Court, parties are free to explore, and conclude, a settlement outside court proceedings (and even before an actual case is filed). In doing so, parties may agree to mediate their dispute. If a settlement is reached before a court case is filed, the agreement may be deposited by the parties with the appropriate trial court. In the event of a breach, a petition may be filed with the court where the agreement was deposited, which court shall summarily hear the petition and, where warranted, enforce the mediated settlement agreement.124
The ADR Act does not include private antitrust claims among those disputes that may not be resolved through the various alternative dispute mechanisms.125 Subject to the requirement of consent, therefore, such claims may be resolved through binding arbitration, mediation, conciliation, early neutral evaluation, mini-trial, or any combination thereof.126
Arbitration of private antitrust suits with a seat in the Philippines may be domestic or international commercial arbitration. International commercial arbitration is governed by Chapter 4 of the ADR Act, which expressly adopts the UNCITRAL Model Law. On the other hand, domestic arbitration is governed by Chapter 5 of the ADR Act, Republic Act No. 876 and certain identified provisions of the UNICTRAL Model Law. One difference between domestic and international commercial arbitration is found in the grounds upon which the award may be vacated. Following the UNCITRAL Model Law, the grounds to vacate an international commercial award rendered in the Philippines are limited but include the so-called public policy exception.127 Although domestic awards may be vacated on more grounds, the same does not specifically include a public policy exception.128 This is significant because awards in antitrust suits may impact the state policy against anticompetitive conduct.
To date, the Supreme Court has not had the occasion to decide on arbitral awards relating to private damage suits involving competition issues.
XIV INDEMNIFICATION AND CONTRIBUTION
The Civil Code specifically provides that the responsibility of two or more joint tortfeasors is solidary.129 Thus, the injured party may proceed against any one or all of said tortfeasors simultaneously in seeking civil damages for unfair competition under Article 28 of the Civil Code. The Competition Act does not have an analogous provision.
Under the Rules of Court, third-party complaints and cross-claims against a co-defendant are allowed in civil actions.
A cross-claim is any claim by one party against a co-party arising out of the transaction or occurrence that is the subject matter either of the original action or of a counterclaim therein.130 Such cross-claim may include a claim that the party against whom it is asserted is or may be liable to the cross-claimant for all or part of a claim asserted in the action against the cross-claimant.131
A third (fourth, etc.) party complaint is a claim that a defending party may, with leave of court, file against a person not a party to the action, called the third (fourth, etc.) party defendant for contribution, indemnity, subrogation or any other relief, in respect of his opponent’s claim.132
Per the Supreme Court, a defendant may implead a third-party defendant (1) on an allegation of liability of the latter to the defendant for contribution, indemnity, subrogation or any other relief; (2) on the ground of direct liability of the third-party defendant to the plaintiff; or (3) the liability of the third-party defendant to both the plaintiff and the defendant.133 In all cases, there must be a causal connection between the claim of the plaintiff in his or her complaint and a claim for contribution, indemnity or other relief of the defendant against the third-party defendant.134 Thus, the Supreme Court prescribed the following tests to determine the propriety of a third-party complaint: (1) whether it arises out of the same transaction on which the plaintiff’s claim is based; or whether the third-party claim, although arising out of another or different contract or transaction, is connected with the plaintiff’s claim; (2) whether the third-party defendant would be liable to the plaintiff or to the defendant for all or part of the plaintiff’s claim against the original defendant, although the third-party defendant’s liability arises out of another transaction; and (3) whether the third-party defendant may assert any defences which the third-party plaintiff has or may have to the plaintiff’s claim.135 Where there is no connection between the third-party claim and the plaintiff’s claim (such as where the plaintiff’s claim is the defendant’s non-payment of rentals for equipment leased under a contract and the defendant’s third-party claim is the third-party defendant’s non-payment of its billings for construction work rendered using the leased equipment), the third-party complaint may be dismissed.136
XV FUTURE DEVELOPMENTS AND OUTLOOK
In view of the recent enactment of the Competition Act, the anticipated developments in the area of antitrust will be related to the effective and expeditious implementation thereof. In this regard, it should be noted that, while the Competition Act took effect on 15 August 2015, the PCC was formally organised only on 1 February 2016 and the IRR only became effective in June 2016. Moreover, while the IRR sought to provide clarity and details, especially as regards the notification and review processes of mergers and acquisitions, much remains to be done in terms of establishing the rules and procedures for the proper implementation, interpretation and application of the statute, especially in terms of private enforcement. It is hoped that the PCC will soon issue guidelines that will supplement the IRR and provide the much-needed procedures, standards and parameters, particularly for the disposition of cases and other proceedings before the PCC.
Currently, the PCC appears to be actively engaged in reviewing mergers and acquisitions. In fact, all of its published decisions thus far pertain to mergers and acquisitions only. Moreover, the first case to be tried under the Competition Act is the much-publicised 69.1 billion Philippine peso joint acquisition of a telecommunications entity by the Philippines’ first- and second-largest telecommunications entities. While the issue in that case is largely procedural in nature (i.e., whether the PCC is correct in subjecting the joint acquisition to its review process notwithstanding that it was executed prior to the coming into effect of the IRR of the Competition Act), it is highly possible that the Supreme Court, when it eventually decides the case, will make pronouncements as to the nature, extent and scope of the powers of the PCC. Following such pronouncements in a landmark case, it is not unlikely that the PCC will be more active in exercising the full breadth of its regulatory functions.
In any event, the legal and compliance landscape of the Philippines is expected to be busy as the new law provides affected parties two years from the law’s effectivity to renegotiate agreements or restructure their businesses to achieve compliance,137 unless proceedings assailing the same have already been previously initiated. An existing business structure, conduct, practice or any act that is violative of the Competition Act, which is not cured or which continues upon the expiration of the two-year period, shall be subjected to administrative, civil, and criminal penalties.138
Further, with the recent enactment of the Competition Act, the field of Philippine antitrust litigation, both private and public, is expected to experience exponential growth. It must be noted that non-governmental organisations (NGOs) have been active in the promotion of consumers’ rights and, in a case before the Supreme Court involving the increase in electricity distribution rates, NGOs alleged collusion among the distributor and suppliers in the wholesale electricity spot market aimed at artificially increasing the spot prices, to the disadvantage of the consumer. Although tainted with procedural defects, the Supreme Court has taken cognisance of the case and the DOJ-OFC was reported to have commenced investigating the allegations of collusion. With the Competition Act as law, these NGOs will likely initiate more suits for the protection of the consumers, even before any PCC inquiry can be commenced. In addition, with the information programme that the PCC is required to aggressively conduct, consumers may become more aware of their rights and may, considering the litigious nature of the Filipino people, initiate complaints with the PCC.
Lastly, it is also possible that court actions shall be filed to assail certain provisions of the Competition Act. These cases would provide an opportunity for the courts to interpret the meaning of the provisions of the law and thereby contribute to the body of knowledge of Philippine competition laws and policies.
1 Patricia-Ann T Prodigalidad is a partner and Christopher Louie D Ocampo is a senior associate at Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).
2 Act No. 3815, Article 185 (penalised ‘Machinations in Public Auctions’) and Article 186 (penalised ‘Monopolies and Combinations in Restraint of Trade’).
3 1987 Philippine Constitution, Article XII, Section 19.
4 Id., Article XII, Section 1.
5 Republic Act No. 10667.
6 Competition Act, Section 14.
7 Id., at Section 14(a).
8 Id., at Section 14(b).
9 Id., at Section 14(c).
10 Id., at Section 15.
11 Id., at Section 20.
12 Id., at Section 5.
13 Id., at Section 12.
14 Id., at Section 12(a).
15 Id., at Section 12(e).
16 Id., at Section 12(a).
17 Established under Executive Order No. 45, series of 2011.
18 Competition Act, Section 13.
19 Id., at Section 31.
25 Id., at Section 45.
26 Id., at Section 12(a).
27 Id., at Section 12(d) in relation to Section 12(h).
28 Id., at Section 45.
29 Id., at Section 12(a).
30 Id., at Sections 13 and 44.
31 The IRR of the Competition Act took effect on 18 June 2016.
32 Id., at Section 50.
33 Act No. 386 (1950).
34 Civil Code, Article 1306.
35 Willaware Products Corporaton v. Jesichris Manufacturing Corporation, G.R. No. 195549, 3 September 2014.
38 Civil Code, Article 19, which provides: ‘Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.’
39 Id., at Article 20, which provides: ‘Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.’
40 Id., at Article 21, which provides: ‘Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.’
41 Competition Act, Section 55.
43 Id., at Section 46(a).
44 Id., at Section 46(b).
45 Civil Code, Article 1146.
46 G.R. No. 160703, 23 September 2005.
51 Act No. 3815 (1930), otherwise known as the ‘Revised Penal Code’, Article 2, provides:
Except as provided in the treaties and laws of preferential application, the provisions of this Code shall be enforced not only within the Philippine Archipelago, including its atmosphere, its interior waters and maritime zone, but also outside of its jurisdiction, against those who:
1. Should commit an offense while on a Philippine ship or airship;
2. Should forge or counterfeit any coin or currency note of the Philippine Islands or obligations and securities issued by the Government of the Philippine Islands;
3. Should be liable for acts connected with the introduction into these islands of the obligations and securities mentioned in the preceding number;
4. While being public officers or employees, should commit an offense in the exercise of their functions; or
5. Should commit any of the crimes against national security and the law of nations, defined in Title One of Book Two of this Code.
52 Civil Code, Article 14, which states: ‘Penal laws and those of public security and safety shall be obligatory upon all who live or sojourn in Philippine territory, subject to the principles of public international law and to treaty stipulations.’
53 Competition Act, Section 3.
54 IRR, Rule 1, Section 2(a).
55 Competition Act, at Section 45.
56 Rules of Court, Rule 3, Section 2.
58 Goco, et al. v. Court of Appeals, et al., G.R. No. 157449, 6 April 2010.
60 Velarde v. Social Justice Society, G.R. No. 159357, 28 April 2004.
61 Rules of Court, Rule 23.
62 Id., at Section 1.
64 Id., at Section 2.
65 Id., at Rule 25.
66 Id., at Rule 25, Section 1.
67 Id., at Section 5.
68 Id., at Rule 26.
69 Id., at Section 1.
70 Id., at Section 5.
71 Id., at Rule 27.
72 Id., at Section 1.
73 Id., at Rule 24.
74 Id., at Section 1.
75 Id., at Section 2.
76 Security Bank Corporation v. Court of Appeals, G.R. No. 135874, 25 January 2000.
78 Ong v. Mazo, et al., G.R. No. 145542, 4 June 2004.
80 Competition Act, Section 33.
81 Rules of Court, Rule 130, Section 49.
82 Id., at Rule 3, Section 12.
83 Mathay, et al. v. The Consolidated Bank and Trust Company, et al., G.R. No. L-23136, 26 August 1974.
84 Banda, et al. v. Ermita, et al., G.R. No. 166620, April 2010.
85 Civil Code, Article 2202.
86 Id., at Article 2199.
87 Id., at Article 2200.
88 Id., at Article 2208.
89 Id., at Article 2208(9).
90 Id., at Article 2216.
91 Id., at Article 2217.
92 Yutuk v. Manila Electric Co., G.R. No. L-13016, 31 May 1961.
93 Civil Code, Article 2221.
94 Willaware Products Corporaton v. Jesichris Manufacturing Corporation, G.R. No. 195549, 3 September 2014.
95 Civil Code, Article 2224.
96 Ventanilla v. Centeno, G.R. No. L-14333, 28 January 1961.
97 Civil Code, Article 2229.
98 Id., at Article 2233.
99 Act No. 3247, Section 6, which states: ‘Any person who shall be injured in his business or property by any other person by reason of anything forbidden or declared to be unlawful by this Act shall recover threefold the damages by him sustained, and the costs of suit, including a reasonable attorney’s fee.’
100 Revised Penal Code, Article 367.
101 See Competition Act, Sections 14 and 15.
102 Civil Code, Article 2199.
103 Id., at Article 2200.
104 Id., at Article 2203.
105 Competition Act, Section 45.
106 Id., at Section 35.
107 Canon 21.
108 Rules of Court, Rule 130, Section 24(b)
109 People of the Philippines v. Hon. Sandiganbayan, et al., G.R. Nos. 115439-41, 16 July 1997.
110 Cayetano v. Monsod, et al., G.R. No. 100113, 3 September 1991.
111 Competition Act, Section 34.
112 Id., at Section 37.
113 Id., at Section 36.
114 Id., at Section 34.
115 Id., at Section 42.
116 Civil Code, Article 2035 provides:
No compromise upon the following questions shall be valid:
(1) The civil status of persons;
(2) The validity of a marriage or a legal separation;
(3) Any ground for legal separation;
(4) Future support;
(5) The jurisdiction of courts;
(6) Future legitime.
117 Id., Article 2034.
118 Supreme Court Resolution in A.M. No. 01-10-5-SC-PHILJA dated 16 October 2001.
119 Supreme Court Resolution in A.M. No. 04-1-12-SC dated 20 January 2004.
120 Pasco, et al. v. Heirs of Filomena de Guzman, et al., G.R. No. 165554, July 26, 2010.
121 Civil Code, Article 2037.
122 ADR Act, Chapter 2 (Mediation), Section 9.
123 Id., at, Section 9(c). Note, however, exceptions to the confidentiality rule are found in Section 11 of the ADR Act.
124 Id., at Section 17.
125 Id., at Section 6 provides: ‘The provisions of this Act shall not apply to the resolution or settlement of the following: (a) labor disputes covered by Presidential Decree No. 442, otherwise known as the Labor Code of the Philippines, as amended, and its Implementing Rules and Regulations; (b) the civil status of persons; (c) the validity of a marriage; (d) any ground for legal separation; (e) the jurisdiction of courts; (f) future legitime; (g) criminal liability; and (h) those which by law cannot be compromised.’
126 Id., at Section 18.
127 Id., at Section 19 in relation to UNCITRAL Model Law, Article 34(2)(b)(ii). See also ADR Act Implementing Rules and Regulations, Article 4.34(b)(ii)(bb),
128 Id., at Sections 32 and 41 in relation to Republic Act No. 876, Section 24.
129 Civil Code, Article 2194.
130 Rules of Court, Rule 6, Section 8.
132 Id., at Section 11.
133 Asian Construction and Development Corporation v. Court of Appeals, et al., G.R. No. 160242, 17 May 2005.
137 Competition Act, Section 53.