PERSONAJE 3

3 SECTION 1. There is hereby created in the Republic of the Philippines a body corporate and politic to be the voluntary organization officially designated to assist the Republic of the Philippines in discharging the obligations set forth in the Geneva Conventions and to perform such other duties as are inherent upon a National Red Cross Society. The national headquarters of this Corporation shall be located in Metropolitan Manila. (Emphasis supplied)

4 Feliciano v. COA (Note: in this case, Local Water Districts were considered as GOCCs as no private capital was invested in it and was controlled by the Government because the Head of LWD is appointed by the Mayors. Unlike LWDs however, the elements of government ownership and control are clearly lacking in the PNRC.)

the corporation is private, it must necessarily exist under a general law. Since private corporations cannot have special charters, it follows that Congress can create corporations with special charters only if such corporations are government-owned or controlled. Although the PNRC is created by a special charter, it cannot be considered a GOCC in the absence of the essential elements of ownership and control by the government. The constitutional prohibition against the creation of private corporations by special charters provides no exception even for non-profit or charitable corporations. Therefore, sections of the PNRC Charter, insofar as it creates the PNRC as a private corporation and grants it corporate powers, is void for being unconstitutional.

Conclusion: PNRC Chairman Office is not a government office or an office in a government-owned or controlled corporation for purposes of the prohibition in Section 13, Article VI of the 1987 Constitution. However, since the PNRC Charter is void (the sections that makes PNRC a private corporation) insofar as it creates the PNRC as a private corporation, the PNRC should incorporate under the Corporation Code and register with the Securities and Exchange Commission if it wants to be a private corporation.

LIBAN V. GORDON (2011) – Comeback Victory

Note: Eto unang digest ko. Kahit mali (not the one in syllabus), I’ll include it na lang para bonggang recit! Pero can be disregarded kung tamad basahin.

FACTS: In a previous decision, the Court held that GORDON did not forfeit his seat in the Senate when he accepted the chairmanship of the PNRC Board of Governors, as “the office of the PNRC Chairman is not a government office or an office in a government-owned or controlled corporation for purposes of the prohibition in Section 13, Article VI of the 1987 Constitution.” In the same decision, the court also declared void certain sections in the PNRC Charter (RA 95) “insofar as it creates the PNRC as a private corporation” and consequently ruled that “the PNRC should incorporate under the Corporation Code and register with the Securities and Exchange Commission if it wants to be a private corporation.” (Note: PNRC was not originally a party to the case, sinama lang sila bigla) To this, GORDON and PNRC filed a MPR (partial recon) to sustain the constitutionality of PNRC’s charter.

GORDON’s contentions were: that the constitutionality of RA 95 was never raised by the parties and that PNRC’s structure is sui generis (doesn’t qualify strictly private character though it performs humanitarian functions).

ISSUE: W/N PNRC’s Charter is unconstitutional. – NO.

RATIO:

Not raised by the parties

Since constitutionality of RA 95 not raised by parties and not among issues defined in the body of previous decision, it was not the lis mota of the case. And as previously held by the SC, the court will not touch the issue of unconstitutionality unless it is the very lis mota. As such, the Court should not have declared void certain sections of RA 95 (PNRC Charter). The court should hav execised judicial restraint on the matter. In addition, hinde naman respondent ang PNRC sa previous case, bakit sila dinamay ng Court? By analogy,

Sui Generis

PNRC’s structure is sui generis, because from the nature of PNRC, there is none like it not just in terms of structure, but also in terms of history, public service and official status accorded to it by the State and the international community. In its charter, PNRC renders significant public service (voluntary aid to sick/wounded, act in voluntary relief, etc). The sui generis character of PNRC is supported by the fact that RA 95 has remained valid since its enactment (1947) and effectivity (’35, ’73, 87 Consti).

In a previous case⁵ the court explained that the purpose of the constitutional provision prohibiting Congress from creating private corporations was to prevent the granting of special privileges to certain individuals, families, or groups, which were denied to other groups. Basing on this, it can be seen that the PNRC Charter does not come within the spirit of this constitutional provision, as it does not grant special privileges to a particular individual, family, or group, but creates an entity that strives to serve the common good.

Furthermore, a strict and mechanical interpretation of Article XII, Section 16 of the 1987 Constitution will hinder the State in adopting measures that will serve the public good or national interest.

The Court also recognized the public service rendered by the PNRC as the government’s partner in the observance of its international commitments, citing the RP’s adherence to the Geneva Conventions. In the same regard, the Court recognizes too the country’s adherence to the Geneva Convention and respect the unique status of the PNRC in consonance with its treaty obligations. By requiring the PNRC to organize under the Corporation Code just like any other private corporation, the special status of PNRC was lost.

The fact that GORDON was allowed to hold the position of Chairman of PNRC concurrently while he was Senator does not ipso facto imply that the PNRC is a

“private corporation” that must be organized under the Corporation Code. The sui generis character of PNRC

5 Feliciano v. Commission on Audit

requires us to approach controversies involving the PNRC on a case-to-case basis.

Conclusion: Since PNRC enjoys a special status with its commitments under international law, the court cannot suddenly refuse to recognize its existence. The sections of the PNRC Charter that were declared void must therefore stay.

SECTION 19.

The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.

TATAD v. SECRETARY OF ENERGY

Facts:The petitions filed challenged the constitutionality of RA No. 8180 entitled “An Act Deregulating the Downstream Oil Industry and For Other Purposes” and its implementing EO, 372. The RA ended 26 years of government regulation.

History (sit back and relax muna)

Prior to 1971, there was no regulation of the oil industry.

Oil companies were free to enter and exit the market without any government interference. In 1971, the crippling oil crisis led the government to create the Oil Industry Commission to regulate the business of importing, exporting, shipping, processing, refining, selling, etc. crude oil, gas, and other refined petroleum products.

The OIC was vested with the power to fix the market prices for these.

The government saw the need for a more active role of Filipinos in the oil industry (controlled by multinationals whose interests did not always coincide with that of the Filipinos). Hence, Marcos created the Phil.

National Oil Corporation (PNOC) to break the control by foreigners. It engaged in the business of refining, marketing, etc. of petroleum. It operated under the business name PETRON, acquiring ownership of ESSO Phil, Filoil, and controlling shares of Bataan Refining Corp (the largest refinery here).

Marcos also created the Oil Price Stabilization Fund (OPSF) to cushion the effects of frequent changes in the price. The fund was used to reimburse the oil companies for cost increases in crude oil and imported petroleum and for cost underrecovery incurred as a result of the reduction of domestic prices of these products.

By 1985, only 3 oil companies were operating in the country – Caltex, Shell and PETRON. In 1987, Aquino created the Energy Regulatory Board to regulate the business of the importing, processing, selling, etc of energy resources when warranted and only when public necessity required. In 1992, the Department of Energy was created. At this time, the thrust of the Phil energy

program was toward privatization of government agencies related to energy and deregulation. The government approved the privatization of Petron. In 1996, Congress deregulated the downstream oil industry through the enactment of the now assailed law.

The deregulation process has two phases: the transition and the full deregulation phases. During transition, controls of the non-pricing aspects of the oil industry were to be lifted. The ff. were to be done: 1) liberalization of oil importation, exportation, manufacturing, marketing, distribution, 2) implementation of an automatic pricing mechanism, 3) implementation of an automatic formula to set margins of dealers and rates of haulers, water transport operators, and pipeline concessionaires, and 4) restructuring of oil taxes. Upon full deregulation, controls on the price of oil and forex were to be lifted and the OPSF abolished. The first phase started on Aug.

1996. In Feb. 1997, the President implemented the full deregulation of the industry through EO 372.

(Here we go… the underlined allegation is the one related to our topic)

Tatad sought to annul section 5 (b) of RA 8180 because:

1) the imposition of different tariff rates on imported crude oil and imported refined petroleum products violates the equal protection clause, 2) the imposition of these differing rates does not deregulate the industry but instead controls the oil industry, 3) the inclusion of the tariff provision violates the Const provision requiring every law to have only one subject, since they contend that the imposition of tariff rates is foreign to the subject of the law.

Lagman et al. contest the constitutionality of Sec.

15 of RA 8180 and EO 392 because: 1) Sec. 15 constitutes an undue delegation of legislative power to the President and Sec. of Energy bec. it does not provide a determinate standard in determining when to implement the full deregulation, 2) EO 392 is arbitrary and unreasonable because it was enacted to the alleged depletion of the OPSF, a condition not found in the law, and 3) They allow the formation of a de facto cartel among the three existing oil companies in violation of the constitutional prohibition against monopolies, combinations in restraint of trade and unfair competition – particularly the ff provisions:

Sec.5(b) "Any law to the contrary notwithstanding and starting with the effectivity of this Act, tariff duty shall be imposed and collected on imported crude oil at the rate of three percent (3%) and imported refined petroleum products at the rate of seven percent (7%) except fuel oil and LPG, the rate for which shall be the same as that for imported crude oil. Provided, that beginning on January 1, 2004 the tariff rate on imported crude oil and refined petroleum products shall be the same. Provided, further, that this provision may be amended only by an Act of

Congress."

Sec. 6. "To ensure the security and continuity of petroleum crude and products supply, the DOE shall require the refiners and importers to maintain a minimum inventory equivalent to ten percent (10%) of their respective annual sales volume or forty (40) days of supply, whichever is lower,"

Sec.9(b) "To ensure fair competition and prevent cartels and monopolies in the downstream oil industry, the following acts shall be prohibited:

(b) Predatory pricing which means selling or offering to sell any product at a price unreasonably below the industry average cost so as to attract customers to the detriment of competitors.

Respondents aver that these provisions actually implement the policies and objectives of RA 8180. The 4%

tariff differential (5b) is designed to encourage new entrants to invest in refineries. The inventory requirement (6) is meant to guaranty continuous domestic supply of petroleum and to discourage fly-by-night operators. The prohibition against predatory pricing (9b) is intended to protect prospective entrants. They manifest to the SC that new players have entered the Philippines after deregulation and have captured 3-5% of the oil market.

Issue: Whether RA 8180 violates the constitutional prohibition against monopolies, combinations in restraint of trade and unfair competition – YES

Ratio: A monopoly is a privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right or power to carry on a particular business or trade, manufacture of a particular article, or control the sale or whole supply of a particular commodity.

It is a form of market structure in which one or only a few firms dominate the total sales of a product or service.

A combination in restraint of trade is an agreement or understanding between two or more persons, in the form of a contract, trust, pool, holding company, or other form of association, for the purpose of unduly restricting competition, monopolizing trade and commerce in a certain commodity, controlling its production, distribution and price, or otherwise interfering with freedom of trade without statutory authority.

Combination in restraint of trade refers to the means while monopoly refers to the end.

While the Constitution embraced free enterprise as an economic creed, it did not prohibit per se the operation of monopolies which can, however, be regulated in the public interest. However, combinations in restraint of trade and unfair competitions are absolutely prescribed.

Sec. 19, Art. XII is anti-trust in history and in spirit. It espouses competition. The desirability of competition is the reason for the prohibition against restraint of trade, the

reason for the interdiction of unfair competition, and the reason for regulation of unmitigated monopolies.

Competition alone can release the creative forces of the market. But this type of competition is one that is fighting yet fair. It requires ideally the presence of several players.

A market controlled by one player (monopoly) or dominated by a handful (oligopoly) is hardly the market where honest competition will prevail. Hence, they deserve careful scrutiny.

4% tariff differential and inventory requirement are significant barriers to new entrants

In the case at bar, it cannot be denied that our downstream oil industry is operated and controlled by a foreign oligopoly. The tariff differential rate of 4% works to their immense benefit. It erects a high barrier to the entry of new players. New players intending to equalize the market would have to spend billions to build their own refineries. Those who will not build but will still compete by merely importing refined products will suffer the huge disadvantage by increasing their product cost by 4%.

Hence, they will be competing on an uneven field.

The provision on inventory widens the advantage of Petron, Shell and Caltex against new entrants since they can easily comply with the inventory requirement in view of their existing storage facilities. Prospective competitors will find compliance difficult because of the cost. With respect to the predatory pricing, the SC said that it cannot be isolated and its validity is interlocked with the barriers imposed by the RA. The rationale for predatory pricing is the sustaining of losses today that will give a firm monopoly profits in the future. The monopoly profits will never materialize if the market it flooded with new entrants as soon as the predator attempts to raise its price. Predatory pricing will be profitable only if the market contains significant barriers to new entry. Thus, this provision does not protect prospective competitors as alleged by respondents.

RA 8180 declared unconstitutional and EO 372 void. Although there was a separability clause, the law just had too many constitutional deformities. It deals with oil, a commodity whose supply and price affect the lifeblood of the nation. The RA with its anti-competition provisions cannot be allowed to stand despite Congress working to remedy its defects.

SC ruling on other issues:

One title – one subject rule not violated

Sec. 5 (b) providing for tariff differential is germane to the subject of deregulation. The title need not mirror, fully index or catalogue all contents and minute details of the law.

No undue delegation of power

Sec. 15 can hurdle both the completeness test and sufficient standard tests. Congress expressly provided that full deregulation will start at the end of March 1997, regardless of the occurrence of any event. Sec. 15 lays down the standard to guide the judgment of the President – he is to time its as far as practicable when the prices of crude oil and petroleum products in the world market are declining and when the exchange rate of the peso in relation to the dollar is stable.

Note: There are concurring, separate and dissenting opinions, but they were just too long. Sorry 

ARTICLE XIII