Republic of the Philippines
G.R. No. 132451
December 17, 1999
CONGRESSMAN ENRIQUE T. GARCIA, petitioner,
HON. RENATO C. CORONA, in his capacity as the Executive Secretary, HON. FRANCISCO VIRAY, in his capacity as the Secretary of Energy, CALTEX PHILIPPINES INC., PILIPINAS SHELL PETROLEUM CORP. and PETRON CORP., respondents.
D E C I S I O N
On November 5, 1997, this Court in Tatad v. Secretary of the Department of Energy and Lagman, et al., v. Hon. Ruben Torres, et al.,1 declared Republic Act No. 8180, entitled “An Act Deregulating the Downstream Oil Industry and For Other Purposes”, unconstitutional, and its implementing Executive Order No. 392 void.
R.A. 8180 was struck down as invalid because three key provisions intended to promote free competition were shown to achieve the opposite result. More specifically, this Court ruled that its provisions on tariff differential, stocking of inventories, and predatory pricing inhibit fair competition, encourage monopolistic power, and interfere with the free interaction of the market forces.
While R.A. 8180 contained a separability clause, it was declared unconstitutional in its entirety since the three (3) offending provisions so permeated the law that they were so intimately the esse of the law. Thus, the whole statute had to be invalidated.
As a result of the Tatad decision, Congress enacted Republic Act No. 8479, a new deregulation law without the offending provisions of the earlier law. Petitioner Enrique T. Garcia, a member of Congress, has now brought this petition seeking to declare Section 19 thereof, which sets the time of full deregulation, unconstitutional. After failing in his attempts to have Congress incorporate in the law the economic theory he espouses, petitioner now asks us, in the name of upholding the Constitution, to undo a violation which he claims Congress has committed.
The assailed Section 19 of R.A. 8479 states in full:
SEC. 19. Start of Full Deregulation. – Full deregulation of the Industry shall start five (5) months following the effectivity of this Act: Provided, however, That when the public interest so requires, the President may accelerate the start of full deregulation upon the recommendation of the DOE and the Department of Finance (DOF) when the prices of crude oil and petroleum products in the world market are declining and the value of the peso in relation to the US dollar is stable, taking into account relevant trends and prospects: Provided, further, That the foregoing provision notwithstanding, the five (5)-month Transition Phase shall continue to apply to LPG, regular gasoline and kerosene as socially-sensitive petroleum products and said petroleum products shall be covered by the automatic pricing mechanism during the said period.
Upon the implementation of full deregulation as provided herein, the Transition Phase is deemed terminated and the following laws are repealed:
(a) Republic Act No. 6173, as amended;
(b) Section 5 of Executive Order No. 172, as amended;
(c) Letter of Instruction No. 1431, dated October 15, 1984;
(d) Letter of Instruction No. 1441, dated November 20, 1984, as amended;
(e) Letter of Instruction No. 1460, dated May 9, 1985;
(f) Presidential Decree No. 1889; and
(g) Presidential Decree No. 1956, as amended by Executive Order No. 137:
Provided, however, That in case full deregulation is started by the President in the exercise of the authority provided in this Section, the foregoing laws shall continue to be in force and effect with respect to LPG, regular gasoline and kerosene for the rest of the five (5)-month period.
Petitioner contends that Section 19 of R.A. 8479, which prescribes the period for the removal of price control on gasoline and other finished products and for the full deregulation of the local downstream oil industry, is patently contrary to public interest and therefore unconstitutional because within the short span of five months, the market is still dominated and controlled by an oligopoly of the three (3) private respondents, namely, Shell, Caltex and Petron.
The objective of the petition is deceptively simple. It states that if the constitutional mandate against monopolies and combinations in restraint of trade2 is to be obeyed, there should be indefinite and open-ended price controls on gasoline and other oil products for as long as necessary. This will allegedly prevent the “Big 3” – Shell, Caltex and Petron – from price-fixing and overpricing. Petitioner calls the indefinite retention of price controls as “partial deregulation”.
The grounds relied upon in the petition are:
SECTION 19 OF R.A. NO. 8479 WHICH PROVIDES FOR FULL DEREGULATION FIVE (5) MONTHS OR EARLIER FOLLOWING THE EFFECTIVITY OF THE LAW, IS GLARINGLY PRO-OLIGOPOLY, ANTI-COMPETITION AND ANTI-PEOPLE, AND IS THEREFORE PATENTLY UNCONSTITUTIONAL FOR BEING IN GROSS AND CYNICAL CONTRAVENTION OF THE CONSTITUTIONAL POLICY AND COMMAND EMBODIED IN ARTICLE XII, SECTION 19 OF THE 1987 CONSTITUTION AGAINST MONOPOLIES AND COMBINATIONS IN RESTRAINT OF TRADE.
SAID SECTION 19 OF R.A. NO. 8479 IS GLARINGLY PRO-OLIGOPOLY, ANTI-COMPETITION AND ANTI-PEOPLE, FOR THE FURTHER REASON THAT IT PALPABLY AND CYNICALLY VIOLATES THE VERY OBJECTIVE AND PURPOSE OF R.A. NO. 8479, WHICH IS TO ENSURE A TRULY COMPETITIVE MARKET UNDER A REGIME OF FAIR PRICES.
SAID SECTION 19 OF R.A. NO. 8479, BEING GLARINGLY PRO-OLIGOPOLY, ANTI-COMPETITION AND ANTI-PEOPLE, BEING PATENTLY UNCONSTITUTIONAL AND BEING PALPABLY VIOLATIVE OF THE LAW’S POLICY AND PURPOSE OF ENSURING A TRULY COMPETITIVE MARKET UNDER A REGIME OF FAIR PRICES, IS A VERY GRAVE AND GRIEVOUS ABUSE OF DISCRETION ON THE PART OF THE LEGISLATIVE AND EXECUTIVE BRANCHES OF GOVERNMENT.
PREMATURE FULL DEREGULATION UNDER SECTION 19 OF R.A. NO. 8479 MAY AND SHOULD THEREFORE BE DECLARED NULL AND VOID EVEN AS THE REST OF ITS PROVISIONS REMAIN IN FORCE, SUCH AS THE TRANSITION PHASE OR PARTIAL DEREGULATION WITH PRICE CONTROLS THAT ENSURES THE PROTECTION OF THE PUBLIC INTEREST BY PREVENTING THE BIG 3 OLIGOPOLY’S PRICE-FIXING AND OVERPRICING.3
The issues involved in the deregulation of the downstream oil industry are of paramount significance. The ramifications, international and local in scope, are complex. The impact on the nation’s economy is pervasive and far-reaching. The amounts involved in the oil business are immense. Fluctuations in the supply and price of oil products have a dramatic effect on economic development and public welfare. As pointed out in the Tatad decision, few cases carry a surpassing importance on the daily life of every Filipino. The issues affect everybody from the poorest wage-earners and their families to the richest entrepreneurs, from industrial giants to humble consumers.
Our decision in this case is complicated by the unstable oil prices in the world market. Even as this case is pending, the price of OPEC oil is escalating to record levels. We have to emphasize that our decision has nothing to do with worldwide fluctuations in oil prices and the counter-measures of Government each time a new development takes place.
The most important part of deregulation is freedom from price control. Indeed, the free play of market forces through deregulation and when to implement it represent one option to solve the problems of the oil-consuming public. There are other considerations which may be taken into account such as the reduction of taxes on oil products, the reinstitution of an Oil Price Stabilization Fund, the choice between government subsidies taken from the regular taxpaying public on one hand and the increased costs being shouldered only by users of oil products on the other, and most important, the immediate repeal of the oil deregulation law as wrong policy. Petitioner wants the setting of prices to be done by Government instead of being determined by free market forces. His preference is continued price control with no fixed end in sight. A simple glance at the factors surrounding the present problems besetting the oil industry shows that they are economic in nature.
R.A. 8479, the present deregulation law, was enacted to implement Article XII, Section 19 of the Constitution which provides:
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.
This is so because the Government believes that deregulation will eventually prevent monopoly. The simplest form of monopoly exists when there is only one seller or producer of a product or service for which there are no substitutes. In its more complex form, monopoly is defined as the joint acquisition or maintenance by members of a conspiracy, formed for that purpose, of the power to control and dominate trade and commerce in a commodity to such an extent that they are able, as a group, to exclude actual or potential competitors from the field, accompanied with the intention and purpose to exercise such power.4
Where two or three or a few companies act in concert to control market prices and resultant profits, the monopoly is called an oligopoly or cartel. It is a combination in restraint of trade.
The perennial shortage of oil supply in the Philippines is exacerbated by the further fact that the importation, refining, and marketing of this precious commodity are in the hands of a cartel, local but made up of foreign-owned corporations. Before the start of deregulation, the three private respondents controlled the entire oil industry in the Philippines.
It bears reiterating at the outset that the deregulation of the oil industry is a policy determination of the highest order. It is unquestionably a priority program of Government. The Department of Energy Act of 19925 expressly mandates that the development and updating of the existing Philippine energy program “shall include a policy direction towards deregulation of the power and energy industry.”
Be that as it may, we are not concerned with whether or not there should be deregulation. This is outside our jurisdiction. The judgment on the issue is a settled matter and only Congress can reverse it. Rather, the question that we should address here is – are the method and the manner chosen by Government to accomplish its cherished goal offensive to the Constitution? Is indefinite price control in the manner proposed by petitioner the only feasible and legal way to achieve it?
Petitioner has taken upon himself a most challenging task. Unquestionably, the direction towards which the nation’s efforts at economic and social upliftment should be addressed is a function of Congress and the President. In the exercise of this function, Congress and the President have obviously determined that speedy deregulation is the answer to the acknowledged dominion by oligopolistic forces of the oil industry. Thus, immediately after R.A. 8180 was declared unconstitutional in the Tatad case, Congress took resolute steps to fashion new legislation towards the objective of the earlier law. Invoking the Constitution, petitioner now wants to slow down the process.
While the Court respects the firm resolve displayed by Congress and the President, all departments of Government are equally bound by the sovereign will expressed in the commands of the Constitution. There is a need for utmost care if this Court is to faithfully discharge its duties as arbitral guardian of the Constitution. We cannot encroach on the policy functions of the two other great departments of Government. But neither can we ignore any overstepping of constitutional limitations. Locating the correct balance between legality and policy, constitutional boundaries and freedom of action, and validity and expedition is this Court’s dilemma as it resolves the legitimacy of a Government program aimed at giving every Filipino a more secure, fulfilling and abundant life.
Our ruling in Tatad is categorical that the Constitution’s Article XII, Section 19, is anti-trust in history and spirit. It espouses competition. We have stated that only competition which is fair can release the creative forces of the market. We ruled that the principle which underlies the constitutional provision is competition. Thus:
Section 19, Article XII of our Constitution 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 is thus the underlying principle of section 19, Article XII of our Constitution which cannot be violated by R.A. No. 8180. We subscribe to the observation of Prof. Gellhorn that the objective of anti-trust law is “to assure a competitive economy, based upon the belief that through competition producers will strive to satisfy consumer wants at the lowest price with the sacrifice of the fewest resources. Competition among producers allows consumers to bid for goods and services, and thus matches their desires with society’s opportunity costs.” He adds with appropriateness that there is a reliance upon “the operation of the ‘market’ system (free enterprise) to decide what shall be produced, how resources shall be allocated in the production process, and to whom the various products will be distributed. The market system relies on the consumer to decide what and how much shall be produced, and on competition, among producers to determine who will manufacture it.”6
In his recital of the antecedent circumstances, petitioner repeats in abbreviated form the factual findings and conclusions which led the Court to declare R.A. 8180 unconstitutional. The foreign oligopoly or cartel formed by respondents Shell, Caltex and Petron, their indulging in price-fixing and overpricing, their blockade tactics which effectively obstructed the entry of genuine competitors, the dangers posed by the oil cartel to national security and economic development, and other prevailing sentiments are stated as axiomatic truths. They are repeated in capsulized context as the current background facts of the present petition.
The empirical existence of this deplorable situation was precisely the reason why Congress enacted the oil deregulation law. The evils arising from conspiratorial acts of monopoly are recognized as clear and present. But the enumeration of the evils by our Tatad decision was not for the purpose of justifying continued government control, especially price control. The objective was, rather, the opposite. The evils were emphasized to show the need for free competition in a deregulated industry. And to be sure, the measures to address these evils are for Congress to determine, but they have to meet the test of constitutional validity.
The Court respects the legislative finding that deregulation is the policy answer to the problems. It bears stressing that R.A. 8180 was declared invalid not because deregulation is unconstitutional. The law was struck down because, as crafted, three key provisions plainly encouraged the continued existence if not the proliferation of the constitutionally proscribed evils of monopoly and restraint of trade.
In sharp contrast, the present petition lacks a factual foundation specifically highlighting the need to declare the challenged provision unconstitutional. There is a dearth of relevant, reliable, and substantial evidence to support petitioner’s theory that price control must continue even as Government is trying its best to get out of regulating the oil industry. The facts of the petition are, in the main, a general dissertation on the evils of monopoly.
Petitioner overlooks the fact that Congress enacted the deregulation law exactly because of the monopoly evils he mentions in his petition. Congress instituted the lifting of price controls in the belief that free and fair competition was the best remedy against monopoly power. In other words, petitioner’s facts are also the reasons why Congress lifted price controls and why the President accelerated the process. The facts adduced in favor of continued and indefinite price control are the same facts which supported what Congress believes is an exercise of wisdom and discretion when it chose the path of speedy deregulation and rejected Congressman Garcia’s economic theory.
The petition states that it is using the very thoughts and words of the Court in its Tatad decision. Those thoughts and words, however, were directed against the tariff differential, the inventory requirement, and predatory pricing, not against deregulation as a policy and not against the lifting of price controls.
A dramatic, at times expansive and grandiloquent, reiteration of the same background circumstances narrated in Tatad does not squarely sustain petitioner’s novel thesis that there can be deregulation without lifting price controls.
Petitioner may call the industry subject to price controls as deregulated. In enacting the challenged provision, Congress, on the other hand, has declared that any industry whose prices and profits are fixed by government authority remains a highly regulated one.
Petitioner, therefore, engages in a legal paradox. He fails to show how there can be deregulation while retaining government price control. Deregulation means the lifting of control, governance and direction through rule or regulation. It means that the regulated industry is freed from the controls, guidance, and restrictions to which it used to be subjected. The use of the word “partial” to qualify deregulation is sugar-coating. Petitioner is really against deregulation at this time.
Petitioner states that price control is good. He claims that it was the regulation of the importation of finished oil products which led to the exit of competitors and the consolidation and dominion of the market by an oligopoly, not price control. Congress and the President think otherwise.
The argument that price control is not the villain in the intrusion and growth of monopoly appears to be pure theory not validated by experience. There can be no denying the fact that the evils mentioned in the petition arose while there was price control. The dominance of the so-called “Big 3” became entrenched during the regime of price control. More importantly, the ascertainment of the cause and the method of dismantling the oligopoly thus created are a matter of legislative and executive choice. The judicial process is equipped to handle legality but not wisdom of choice and the efficacy of solutions.
Petitioner engages in another contradiction when he puts forward what he calls a self-evident truth. He states that a truly competitive market and fair prices cannot be legislated into existence. However, the truly competitive market is not being created or fashioned by the challenged legislation. The market is simply freed from legislative controls and allowed to grow and develop free from government interference. R.A. 8479 actually allows the free play of supply and demand to dictate prices. Petitioner wants a government official or board to continue performing this task. Indefinite and open-ended price control as advocated by petitioner would be to continue a regime of legislated regulation where free competition cannot possibly flourish. Control is the antithesis of competition. To grant the petition would mean that the Government is not keen on allowing a free market to develop. Petitioner’s “self-evident truth” thus supports the validity of the provision of law he opposes.
New players in the oil industry intervened in this case. According to them, it is the free market policy and atmosphere of deregulation which attracted and brought the new participants, themselves included, into the market. The intervenors express their fear that this Court would overrule legislative policy and replace it with petitioner’s own legislative program.
The factual allegations of the intervenors have not been refuted and we see no reason to doubt them. Their argument that the co-existence of many viable rivals create free market conditions induces competition in product quality and performance and makes available to consumers an expanded range of choices cannot be seriously disputed.
On the other hand, the pleadings of public and private respondents both put forth the argument that the challenged provision is a policy decision of Congress and that the wisdom of the provision is outside the authority of this Court to consider. We agree. As we have ruled in Morfe v. Mutuc7:
(I)t is well to remember that this Court, in the language of Justice Laurel, “does not pass upon question or wisdom, justice or expediency of legislation.” As expressed by Justice Tuason: “It is not the province of the courts to supervise legislation and keep it within the bounds of propriety and common sense. That is primarily and exclusively a legislative concern.” There can be no possible objection then to the observation of Justice Montemayor: “As long as laws do not violate any Constitutional provision, the Courts merely interpret and apply them regardless of whether or not they are wise or salutary.” For they, according to Justice Labrador, “are not supposed to override legitimate policy and x x x never inquire into the wisdom of the law.”
It is thus settled, to paraphrase Chief Justice Concepcion in Gonzales v. Commission on Elections, that only congressional power or competence, not the wisdom of the action taken, may be the basis for declaring a statute invalid. This is as it ought to be. The principle of separation of powers has in the main wisely allocated the respective authority of each department and confined its jurisdiction to such a sphere. There would then be intrusion not allowable under the Constitution if on a matter left to the discretion of a coordinate branch, the judiciary would substitute its own. If there be adherence to the rule of law, as there ought to be, the last offender should be the courts of justice, to which rightly litigants submit their controversy precisely to maintain unimpaired the supremacy of legal norms and prescriptions. The attack on the validity of the challenged provision likewise insofar as there may be objections, even if valid and cogent, on its wisdom cannot be sustained.
In this petition, Congressman Garcia seeks to revive the long settled issue of the timeliness of full deregulation, which issue he had earlier submitted to this Court by way of a Partial Motion for Reconsideration in the Tatad case. In our Resolution dated December 3, 1997, which has long become final and executory, we stated:
We shall first resolve petitioner Garcia’s linchpin contention that the full deregulation decreed by R.A. No. 8180 to start at the end of March 1997 is unconstitutional. For prescinding from this premise, petitioner suggests that “we simply go back to the transition period, price control will be revived through the automatic pricing mechanism based on Singapore Posted Prices. The Energy Regulatory Board x x x would play a limited and ministerial role of computing the monthly price ceiling of each and every petroleum fuel product, using the automatic pricing formula. While the OPSF would return, this coverage would be limited to monthly price increases in excess of P 0.50 per liter.”
We are not impressed by petitioner Garcia’s submission. Petitioner has no basis in condemning as unconstitutional per se the date fixed by Congress for the beginning of the full deregulation of the downstream oil industry. Our Decision merely faulted the Executive for factoring the depletion of OPSF in advancing the date of full deregulation to February 1997. Nonetheless, the error of the Executive is now a non-issue for the full deregulation set by Congress itself at the end of March 1997 has already come to pass. March 1997 is not an arbitrary date. By that date, the transition period has ended and it was expected that the people would have adjusted to the role of market forces in shaping the prices of petroleum and its products. The choice of March 1997 as the date of full deregulation is a judgment of Congress and its judgment call cannot be impugned by this Court.8
Reduced to its basic arguments, it can be seen that the challenge in this petition is not against the legality of deregulation. Petitioner does not expressly challenge deregulation. The issue, quite simply, is the timeliness or the wisdom of the date when full deregulation should be effective.
In this regard, what constitutes reasonable time is not for judicial determination. Reasonable time involves the appraisal of a great variety of relevant conditions, political, social and economic. They are not within the appropriate range of evidence in a court of justice. It would be an extravagant extension of judicial authority to assert judicial notice as the basis for the determination.9
We repeat that what petitioner decries as unsuccessful is not a final result. It is only a beginning. The Court is not inclined to stifle deregulation as enacted by Congress from its very start. We leave alone the program of deregulation at this stage. Reasonable time will prove the wisdom or folly of the deregulation program for which Congress and not the Court is accountable.
Petitioner argues further that the public interest requires price controls while the oligopoly exists, for that is the only way the public can be protected from monopoly or oligopoly pricing. But is indefinite price control the only feasible and legal way to enforce the constitutional mandate against oligopolies?
Article 186 of the Revised Penal Code, as amended, punishes as a felony the creation of monopolies and combinations in restraint of trade. The Solicitor General, on the other hand, cites provisions of R.A. 8479 intended to prevent competition from being corrupted or manipulated. Section 11, entitled “Anti-Trust Safeguards”, defines and prohibits cartelization and predatory pricing. It penalizes the persons and officers involved with imprisonment of three (3) to seven (7) years and fines ranging from One million to Two million pesos. For this purpose, a Joint Task Force from the Department of Energy and Department of Justice is created under Section 14 to investigate and order the prosecution of violations.
Sections 8 and 9 of the Act, meanwhile, direct the Departments of Foreign Affairs, Trade and Industry, and Energy to undertake strategies, incentives and benefits, including international information campaigns, tax holidays and various other agreements and utilizations, to invite and encourage the entry of new participants. Section 6 provides for uniform tariffs at three percent (3%).
Section 13 of the Act provides for “Remedies”, under which the filing of actions by government prosecutors and the investigation of private complaints by the Task Force is provided. Sections 14 and 15 provide how the Department of Energy shall monitor and prevent the occurrence of collusive pricing in the industry.
It can be seen, therefore, that instead of the price controls advocated by the petitioner, Congress has enacted anti-trust measures which it believes will promote free and fair competition. Upon the other hand, the disciplined, determined, consistent and faithful execution of the law is the function of the President. As stated by public respondents, the remedy against unreasonable price increases is not the nullification of Section 19 of R.A. 8479 but the setting into motion of its various other provisions.
For this Court to declare unconstitutional the key provision around which the law’s anti-trust measures are clustered would mean a constitutionally interdicted distrust of the wisdom of Congress and of the determined exercise of executive power.
Having decided that deregulation is the policy to follow, Congress and the President have the duty to set up the proper and effective machinery to ensure that it works. This is something which cannot be adjudicated into existence. This Court is only an umpire of last resort whenever the Constitution or a law appears to have been violated. There is no showing of a constitutional violation in this case.
WHEREFORE, the petition is DISMISSED.
Bellosillo, Melo, Puno, Kapunan, Mendoza, Purisima, Pardo, Buena, and De Leon, Jr., JJ., concur.
Quisumbing, J., see concurring opinion.
Panganiban, J., see separate opinion.
Davide, Jr., C.J., in the result and also joins J. Panganiban in his separate opinion.
Vitug, J., in the result.
Gonzaga-Reyes, J., no part. Spouse with counsel for intervenor.
1281 SCRA 330 (1997).
2CONSTITUTION, Article XII, Section 19.
3Rollo, pp. 15-16.
4American Tobacco Co. v. United States, 328 U.S. 781; 90 L. Ed. 1575.
5Republic Act No. 7638.
6Supra., at 358; citing Gellhorn, Anti Trust Law and Economics in a Nutshell, 1986 ed., p. 45.
722 SCRA 424, at 450-51 (1968); citations omitted.
8Tatad v. Secretary of the Department of Energy, 282 SCRA 337, 353 (1997).
9Coleman v. Miller 307 U.S. 433; 59 S. Ct. 972; 83 L. Ed. 1385 (1939).
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