WHAT ARE ANTI-COMPETITIVE AGREEMENTS?

Anti-competitive agreements include agreements between or among competitors that substantially prevent, restrict or lessen competition. Such agreements may be in the form of a contract, arrangement, understanding, collective recommendation, or concerted action, whether formal or informal, explicit or tacit, written or oral.
Also known as cartels, anti-competitive agreements between or among competitors involve collusive conduct to fix prices, rig bids, limit output, or allocate the market.
Under the PCA, there are anti-competitive agreements that are  per se prohibited (Section 14[a]) and there are agreements that are prohibited for having an anti-competitive object or effect (Section 14[b] and [c]).

WHAT ARE PER SE VIOLATIONS?

These anti-competitive agreements that are inherently illegal and require no further inquiry into their actual effect on the market or the intentions of the parties who engaged in the illegal act or agreement. The Philippine Competition Act classifies price fixing and bid rigging as  per se violations.

PRICE FIXING

Price fixing involves restricting competition as to price, or components thereof, or other terms of trade. This happens when competitors agree on the price of goods or services, rather than independently setting their respective prices.

Illustrative case:

In 2007, the European Commission fined three Dutch brewers for price-fixing of beer in the Netherlands. Heineken, Grolsch, and Bavaria paid a total of 273.7 million Euros while a fourth brewer, InBev, did not receive a fine as it participated in the Commission’s leniency program.The Commission found that between 1996 and 1999 at least, the four brewers held numerous unofficial meetings, during which they coordinated prices and price increases of beer in the Netherlands. Evidence adduced, including handwritten notes, confirmed the dates and places of these unofficial meetings. The companies were determined to have coordinated prices for both “on-trade” (consumption on the premises, such as bars and pubs) and “off-trade” (sale through supermarkets and the like) segments of the beer market in the Netherlands. They also coordinated occasionally on non-pricing aspects, such as conditions offered to individual customers in the on-trade segment. The Commission further found evidence that the brewers were aware that their actions were illegal, as they tried to conceal their activity through the use of code names and hotels/restaurants as venues for their meetings.
For more information, see Case COMP/B/37.766 — Dutch beer market

BID RIGGING

Bid-rigging involves fixing prices at an auction or any form of bidding, including cover bidding, bid suppression, bid rotation, and market allocation, among others. Bid-rigging usually occurs when parties participating in a tender coordinate their bids rather than submit independent proposals.

Illustrative case:

In 2013, the Ontario Superior Court of Justice fined a Japanese automobile parts company CAD5 million for conspiring with other suppliers to rig the bids for the supply of parts to the 2001 and 2006 Honda Civic models fabricated in Canada. Furukawa Electric Co., Ltd., a supplier of electrical boxes (i.e., fuse boxes, relay boxes, and junction blocks) used in motor vehicles, was among the pre-qualified suppliers of Honda Canada. When Honda called for supplier quotes, Furukawa coordinated with its Japan-based competitors regarding their price quotations or bids. These meetings resulted in an arrangement whereby Furukawa would earn the contract for the tender. Consequently, Furukuwa was awarded the contract to supply the automobile parts of the 2001 and 2006 models of the Honda Civic. From 2000 to 2005, the estimated sales amounted to CAD16.5 million. The Competition Bureau learned of the international bid-rigging conspiracy through its Leniency Program, where Furukawa offered to help the Bureau in the investigation of the case, which started in 2009.For more information, see Canada’s Competition Bureau. April 4, 2013. CAD 5 million Fine for a Japanese Supplier of Motor Vehicle Components. Court File No. 13086

WHAT ARE NOT PER SE VIOLATIONS?

Not  per se violations are other anti-competitive agreements prohibited by the law which have the object or effect of substantially preventing, restricting, or lessening competition. Since these agreements are not per se illegal, the PCC needs to conduct inquiries to determine whether they restrict competition and violate the PCA.

SUPPLY RESTRICTION

Supply restriction is an agreement by two or more competitors which sets or limits production levels and create an artificial supply shortage, thereby raising prices. Similar forms of anti-competitive agreements include restrictions in markets, technical development, or investment.

Illustrative case:

In 2010, the Builders’ Association of India filed a complaint against the Cement Manufacturers’ Association (CMA) and the cement manufacturing companies involved for engaging in a cartel arrangement. Competitors were alleged to have discussed various confidential business information through the CMA, such as prices and quantity of production, which led to an agreement of controlling the supply of cement products in the region. After investigation, ten cement manufacturing companies were found guilty of artificially restricting their output which led to price hikes of cement products across India. The Competition Commission of India found the parties guilty of breaching the 2002 Competition Act of India and imposed penalties amounting to INR63.17 billion.For more information, see Competition Commission of India. August 31, 2016. CCI imposes penalties upon cement companies for cartelization. Case No. 29/2010.

MARKET SHARING

Market sharing is a collusive agreement by two or more competitors which divides or allocates the market. Market sharing not only includes territories, but also customers, volume of sales or purchases, and type of goods or services, among other considerations.

Illustrative case:

In 2011, two pharmaceutical companies admitted to dividing the market between them in providing prescription medicines to care homes in England. From May to November 2011, Tomms Pharmacy, a trading company under the subsidiaries of Hamsard 3149, and Lloyds Pharmacy Limited, agreed to distribute medical products in their pre-assigned markets only, resulting in limited choices of prescription medicines for consumers. The Office of Fair Trading (OFT) found that the arrangement breached the 1998 Competition Act of England. The OFT fined Hamsard the amount of GBP387,856; however, under its Leniency Program, OFT granted 100 percent reduction to Lloyds for disclosing the agreement.For more information, see Decision of the Office of Fair Trading. Market sharing agreement and/or concerted practice in relation to the supply of prescription medicines to care homes in England. March 20, 2014. Case CE/9627/12.

WHAT ARE THE EXCEPTIONS TO THE COVERAGE OF ANTI-COMPETITIVE AGREEMENTS?

Agreements not falling under Section 14(a) and 14(b) of the PCA that have an anti-competitive object or effect, but nevertheless contribute 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 anti-competitive. (Note: This only applies to Section 14 (c) of the PCA).