Relevant Markets: Philippine Competition Act Made Simple (Part 2)

Christian Andrew Labitoria Gallardo[1]

Again, let us suppose that Element 115, informally called ununpentium, was discovered to come from the meteors that fell from Calivo, in the Island of Panay. I am in the business of extracting this superheavy element, which was found to be necessary to make objects float in contravention of the laws of gravity, similar to that of UFOs. Subsequently however, a new element, Element 116, was discovered by Montblanc, a childhood friend of mine, through mining from the dark recesses of the Philippine trench. Similar to Element 115, Element 116 can likewise defy the laws of gravity, allowing objects to suspend and propel in thin air without the use of propellers.

Montblanc and I started different companies in order to extract and prepare these mysterious elements in its usable form. Despite the business rivalry however, we remain friendly in our dealings, making sure that our friendship would not suffer for the sake of our business interests. Now the question would be: What constitutes a competition in relation to a market? Furthermore, how friendly or cooperative could we be if we are indeed competitors?

Relevant Market

Unlike the term “competition” which was not clearly defined, a “market” which would be the object of competition was plainly defined in the Philippine Competition Act. It is a group of goods and services which are sufficiently interchangeable or substitutable, and the geographic area where these products or services are being offered.[2] From this definition therefore, two factors must be considered in the determination of the relevant market[3], namely:

I. The product market, in which case the characteristics, price and intended use of the goods or services must be considered in determining whether the products are substantially interchangeable or substitutable, and are therefore of the same relevant market, and

II. The geographic market, in which case the area of the supply and demand of goods are assessed

With the example cited above, Montblanc and I belong to the same relevant market, as our products have the same intended use, that is, to make objects float in direct defiance to the laws of gravity. Furthermore, we both supply these products to the Philippine market.

In previous installment of this series of articles, the three forms of "anticompetitive agreements" were defined. Using the situation presented above, let us cite some concrete examples to delineate one from the other.

Examples

An example of an anti-competitive agreement in the first form would be the standard or common anti-competitive agreement as we know it- price fixing.[4] Regardless of our intention, the mere agreement between Montblanc and I to sell these elements at the standard rate of, say P 899,000 per kilogram constitutes a violation of the Philippine Competition Act. This is so regardless if it was later found out that the said price is reasonable, as the law prohibits price fixing per se.

An example of an anti-competitive agreement in the second form would be a contract to sell only to specific distributors, or to a specific geographic location.[5] An agreement between Montblanc and I to sell only to a few specific listed companies could constitute an anti-competitive arrangement if such an agreement substantially prevents or restricts competition. If proven therefore that it does not actually restrict competition, such as where an agreement to sell only to few companies is for the reason that only these companies have the technical facility to store the superheavy element, or that they have the competence and integrity to properly use these dangerous elements, such an agreement could be held valid.

Given the ingenuity of human mind however, a third form of anti-competitive agreement was added. It is a "catch-all" provision which covers all types of arrangement which are not specifically covered by the first two forms, but nonetheless substantially restricts competition.[6]

With that, it is clear that agreements between competitors on a relevant market are strictly scrutinized to ensure that the public will not be prejudiced, or even abused, by money-hungry entrepreneurs. There are special types of agreements however that are closely monitored by the Philippine Competition Commission, such that a notice must first be sent to them prior to the perfection of the Agreement. Find out more on the next installment of this article. Meanwhile, please do visit our facebook group for free legal advice and updates.

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[1]Christian Andrew Labitoria Gallardo is a recent graduate of the Ateneo School of Law with a Juris Doctor degree, and is currently an associate of the Sangalang and Gaerlan, Business Lawyers, a law firm specializing in labor, corporate and business law. You may reach him through a phone call or message (09157042132) or via email (andrew.gallardo@paladinslaw.org). [2] § 4 (i), RA 10667, Philippine Competition Act. [3] § 4 (k), RA 10667. [4] § 14 (a), RA 10667. [5] § 14 (b), RA 10667. [6] § 14 (c), RA 10667.