ON ANTI-COMPETITIVE AGREEMENTS Self-Study Module #2

sssssst 1 tssssss ssst 2 tsss What are Anti-Competitive What does Agreements? the Philippine Competition Act In general terms, ANTI-COMPETITIVE AGREEMENTS are agreements that substantially prevent, restrict, or lessen competition. say about Some anti-competitive agreements may be classified into anti-competitive “horizontal” and “vertical” agreements. agreements? HORIZONTAL AGREEMENTS are those entered into by and between two (2) or more competitors. For example, two (2) competing As a general rule, the Philippine manufacturers could collude and agree to sell the same product at the Competition Act makes it same . illegal for business rivals to act together in ways that can limit VERTICAL AGREEMENTS are those entered into by and competition, lead to higher between two (2) or more entities at different levels of distribution , or hinder other businesses or production chains such as those entered into by suppliers, from entering the market. manufacturers, distributors, and retailers. Examples include distribution, agency, and franchising agreements. The Philippine Competition Act absolutely prohibits the following agreements, between or among Examples of anti-competitive • Output-Limitations — competitors: agreements include: Agreements which, among • Restricting competition as to others, limit output or control • Price-Fixing — Competitors price, or components thereof, collude with one another to production by fixing production or other terms of trade; levels or setting quotas, fix prices of goods or services, • Fixing prices at an auction or agreements which deal rather than allow prices to be or in any form of bidding with structural overcapacity determined by market forces. including cover bidding, bid or coordination of future • — Parties suppression, bid rotation and Bid-Rigging investment plans. participating in a tender market allocation, and other process coordinate their bids, • Market-Sharing — Producers analogous practices of bid rather than submit independent restrict their sales of goods and manipulation; services to certain geographic bid prices. Cont’d. next page>> areas, developing local .1 1 http://www.tariffcommission.gov.ph/com- petit.html#What%20is%20Competition%20 Policy

*Disclaimer: This self-study module is meant only as an introduction, and for general information purposes. It is not a substitute for the Philippine Competition Act (PCA) or its Implementing Rules and Regulations. It should not be taken as legal advice. ON ANTI-COMPETITIVE AGREEMENTS 2 Self-Study Module #2

>> Cont’d. from previous page Other agreements other than those described above which also These acts or agreements are have the object or effect of substantially preventing, restricting, illegal per se, which means that or lessening competition are also prohibited by the Philippine they are inherently illegal and Competition Act. no further inquiry into their actual effect on the market or the intentions of the parties The also provides that For example, manufacturers who engaged in the illegal act or anti-competitive agreements sometimes restrict the supply agreement is necessary. (not including those which of a product in different have been identified as per se geographic markets only to The law prohibits other violations) which contribute selected retailers not only to anti-competitive agreements to improving the production earn higher profits, but to have which have the object or effect or distribution of goods and an incentive for the of substantially preventing, services or promoting technical product, and provide better restricting, or lessening or economic progress, while service to customers. In such competition such as: allowing consumers a fair share cases, the anti-competitive • Setting, limiting, or controlling of the resulting benefits, may effect of restricting the supply production, markets, technical not necessarily be deemed a of the product could be development, or investment; violation of this Act. outweighed by the efficiency • Dividing or sharing the PCC balances the efficiency and welfare gains to the market, whether by volume of benefits of the questioned act consumer. sales or purchases, territory, against its anti-competitive type of goods or services, implications to determine buyers or sellers, or by any whether or not such acts other means. should be prohibited.

sssssst 3 tssssss What are and collusive agreements?

Generally speaking, a is an association of Cartels and collusive agreements as described businesses in the same industry colluding with one above are illegal. They result in anti-competitive another to susbtantially prevent, restrict, or lessen practices like price-fixing and market-sharing, competition. which, in turn, reduce output and raise prices. There may be in cases wherein there They can also lead to a misallocation of is an explicit or tacit agreement among competing resources—as when goods and services demanded firms in an industry to take steps that will enable by customers are not produced or sold—and create them to dominate the market, control the market an artificial shortage of supply. price, and ultimately act like a or . ON ANTI-COMPETITIVE AGREEMENTS 3 Self-Study Module #2

Cartel and Collusion Cases Around the World

• Petitioned the Attorney General to indict JAPAN: Japan Fair Trade Commission Honda for anti-competitive exclusive • Automotive headlamp and tail-lamp arrangements with its distributors. manufacturers paid a fine amounting to JPY SINGAPORE: Competition Commission of Singapore 4.678 billion for bid-rigging on March 2013. • Bid-rigging by 12 motor vehicle traders (March • Manufacturers of high-fructose corn-syrup, 2013) specific starch syrup manufacturers, and a glucose manufacturer were sanctioned for • In July 2012, fines were imposed on two (2) price-fixing. ferry operators for sharing of information on price. INDONESIA: Indonesian Competition Authority CHINA: National Development and Reform • Possible cartel activity relating to the recent Commission (NDRC) and State Administration for increase in food prices, particularly in the Industry and Commerce (SAIC) prices of beef, chicken, eggs and shallots were investigated. • NDRC imposed monetary sanctions totaling RMB 353M on six (6) Korean and Taiwanese • Nineteen (19) companies were tried for garlic LCD panel makers for cartel behavior. price-fixing. • Five (5) gold retailers through their local THAILAND: Trade Competition Commission industry association were sanctioned for • Probe into anti-competitive foreclosure of price-fixing agreement. The retailers were fined competitor sales in the energy drinks sector. RMB 10.9M while their association was fined the maximum permitted amount of RMB 500,000.