In essence, deregulation shifts the burden of price control from the government to the “market forces” in order (1) to eliminate government intervention that may “do more harm than good” [See public respondent’s Memorandum, p. 19, citing Samuelson and Nordhaus, Economics, 1992 ed., p. 341.] and (2) to achieve a truly competitive market of fair prices. [Sec. 2, RA 8479.] It is also aimed at removing government abuse and corruption in price-setting. At bottom, deregulation is supposed to provide the best goods and services at the cheapest prices.
The policy, however, is not an infallible cure to abuse, for the evil sought to be avoided may well pass on to the market players, particularly when they combine to restrain trade or engage in unfair competition. In the words of Prof. Romulo L. Neri of the Asian Institute of Management, “[t]he market is motivated by price and profits (and sadly, not by moral values [or public interest]). The market does not automatically supply those who need (no matter how badly they need it) but only those who have the money to buy.” [Neri, Economics and Public Policy, 1999 ed., p. 23. Parentheses in original but brackets supplied.]
The buzz words of the third millennium are “deregulation,” “globalization” and “liberalization.” Territorial frontiers are virtually erased by these schemes, as goods and services are exchanged across borders unhampered by traditional tariffs, taxes, currency controls, quantitative restrictions and other protective barriers. Thus, states and governments tend to surrender some of their authorities and powers to the “market” and to the renewed energy of laissez faire, such that the threats to civil liberties and human rights, including economic rights, may shift from government abuses to the more bedeviling market forces that transcend boundaries and sovereignties. In developing countries more than in developed ones, such threats are real and ever present.
Judicial Review to Check Abuses
This is where the power of judicial review comes in – to examine the legal effects of these new economic paradigms and, in the present controversy, to check whether the present Oil Deregulation Law (RA 8479) restrains rather than promotes free trade, in contravention of the Constitution. True, the President and Congress, not this Court, have the power and the prerogative to determine whether to adopt such market policies and, if so, under what conditions and circumstances. However, all such policies and their ramifications must conform to the Constitution. Otherwise, this Court has the duty to strike them down, not because they are unwise or inconvenient, but because they are constitutionally impermissible.
Doctrinally, policies and acts of the political departments of government may be voided by this Court on either of two grounds – infringement of the Constitution or grave abuse of discretion. [Tañada vs. Angara, 272 SCRA 18, May 2, 1997; Tatad vs. Secretary of the Department of Energy, infra; Santiago vs. Guingona Jr., GR No. 134577, November 18, 1998.] An infringement may be proven by demonstrating that the words of the law directly contradict a provision of the fundamental law, or by presenting proof that the law authorizes or enables the respondents to violate the Constitution.
Petitioner Garcia’s Thesis on Unconstitutionality Concerns Policy
Having set down the doctrinal legal parameters, let me now discuss the petitioner’s thesis. Petitioner Enrique T. Garcia anchors his position on the alleged unconstitutionality of Section 19 of RA 8479, [“Sec. 19. Start of Full Deregulation. – Full deregulation of the [Downstream Oil] 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 x x x.”] which sets the full deregulation of the oil industry five months from the effectivity of the law, on the argument that said provision directly violates Section 19, Article XII of the Constitution, which reads as follows:
“Sec. 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.”
He maintains that once Section 19 of RA 8479 is struck down, the government will be able to fix and lower petroleum prices indefinitely while awaiting the advent of “real” competition in the market.
Petitioner contends that the three largest oil companies (the “Big Three”) comprise an oligopoly of the downstream oil industry. Oligopolies, he claims, “negate free market competition and fair prices.” He submits that “regulation through price control x x x is patently required by the public interest [and] the failure to regulate the oligopoly through price control is patently inimical to the national interest and patently negates, circumvents and contravenes Section 19, Article XII of the Constitution.”
In Tatad v. Secretary of the Department of Energy, [281 SCRA 330, 355; November 5, 1997; per Puno, J.] this Court defined a monopoly and a combination in restraint of trade as follows:
“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 a particular article, or control the sale or the 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. On the other hand, 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.”
In that case, RA 8180, the predecessor of RA 8479, was struck down by this Court for being contrary to section 19, Article XII of the Constitution. We took this action because we found that its provisions on (1) tariff differential, (2) minimum inventory and (3) predatory pricing “inhibit fair competition, encourage monopolistic power and interfere with the free interaction of market forces.” We concluded, “The aftermath of R.A. No. 8180 is a deregulated market where competition can be corrupted and where market forces can be manipulated by oligopolies.”
In my Concurring Opinion in Tatad, I labeled RA 8180 as “a pseudo deregulation law which in reality restrains free trade and perpetuates a cartel, an oligopoly” because of the aforecited three provisions, and because petitioners therein demonstrated to the Court “that the Big Three oil companies were producing and processing almost identical products which they were selling to the general public at identical prices. When one company adjusted its prices upwards or downwards, the other two followed suit at the same time and by the same amount.” [This quote is taken from a comment I made in Battles in the Supreme Court, 1998 ed., p. 121.]
In his present Petition, petitioner persistently alleges that “[I]t is self-evident truth that public interest requires the prevention of monopolistic/oligopolistic pricing x x x,” and that such “monopolistic/oligopolistic pricing may be prevented only through price control during the regime of monopoly/oligopoly or through a truly competitive market under a regime of fair prices.” In support of his allegations, he cites “self-evident truths [which] have x x x been officially recognized and implemented during more than 20 years of price control before the passage of the two oil deregulation laws” and which “have also been recognized and upheld by no less than the Supreme Court En Banc in the Tatad and Lagman cases x x x.” He contends that “the Big 3 remain as strong and dominant as ever.”
In other words, petitioner believes that there is no valid reason to lift price control at this time when allegedly there still exists an oligopoly in the industry. He proposes instead that government control should stand for an indefinite period until the new players are able to capture a substantial part of the market.
Unfortunately, however, the foregoing thematic statements and economic theory of Petitioner Garcia are policy in nature and are arguments supporting the wisdom of interim government price control. Indeed, “self-evident truths,” economic theories, deeply-held beliefs, speculative assumptions and generalizations may be the bases of legislative and executive actions, but they cannot be substitutes for evidence and legal arguments in a judicial proceeding. Considered judgment calls of the legislative and the executive departments are the issues of whether the country should adopt the policy of complete or partial deregulation, and when such policy should take effect and over what products or services. These issues come within judicial determination only when there is clear and substantial proof that said policy and its concomitant variations are violative of the Constitution or are made by those agencies in grave abuse of their discretion.
The Legal Issue Is Whether Petitioner Has Submitted Sufficient Proof That the Big Three Have Violated the Constitution
To be more specific, the pivotal issue before this Court is not whether it is wiser and more beneficial to empower the government to fix fuel prices; rather, it is whether petitioner has submitted enough factual bases to justify the legal conclusion that the Big Three – Petron, Shell and Caltex – have combined themselves “in restraint of trade or [to cause] unfair competition,” to such an extent as to legally justify a striking down of Section 19 of RA 8479. The task of proving this issue is not easy; in fact, it is formidable and daunting. This is because laws are prima facie presumed constitutional and, unless clearly shown to be infirm, they will always be upheld. [Lim vs. Pacuing, 240 SCRA 649, January 27, 1995; Tano vs. Socrates, 278 SCRA 154, 1997; Tan vs. People, 290 SCRA 117, May 19, 1998.] So, too, regularity in the performance of official functions is the postulate, and any allegation of grave abuse or irregularity must be proven cogently.
Deregulation per se Is Not Constitutionally Infirm
A close perusal of the assailed Section 19 of RA 8479 and Section 19 of Article XII of the Constitution does not readily reveal their irreconcilability. Indeed, even petitioner admits that the deregulation policy per se is not contrary to the Constitution. Neither could it be successfully argued that the implementation of such policy within the five-month phase-in period is per se anathema to our fundamental law. It is his imperative task therefore to adduce before the Court factual and legal bases to demonstrate clearly and cogently the unconstitutionality of the acts of Congress and the President in adopting and implementing full deregulation of petroleum prices at this time.
In this context, I have pored over the records of this case and searched long and wide for such factual and legal bases but, other than presumptions and generalizations that are unsupported by hard evidence, I could not find any. Petitioner fails to substantiate his allegations that the three oil giants have engaged, directly or indirectly, in an unholy alliance to fix prices and restrain trade.
True, retail prices of petroleum products have been increased, to the consternation of the public, but petitioner has not shown by specific fact or clear proof how the questioned provision of RA 8479 has been used to transgress the Constitution. He has not demonstrated that the Big Three arbitrarily dictate and corrupt the price of oil in a manner violative of the Constitution.
Petitioner merely resurrects and relies heavily on the arguments, the statistics and the proofs he submitted two years ago in the first oil deregulation case, Tatad v. Secretary of the Department of Energy. Needless to state, those reasons were taken into consideration in said case, and they indeed helped show the unconstitutionality of RA 8180. But exactly the same old grounds cannot continue to support petitioner’s present allegation that the major oil companies – Petron, Shell and Caltex – persist to this date in their oligopolistic practices, as a consequence of the current Oil Deregulation Law and in violation of the Constitution. I n brief, the legal cause and effect relationship has not been amply shown.
Petitioner Has Not Proven Arbitrariness or Despotism
Petitioner harps at the five-month period of transition from price control to full deregulation provided under Section 19 of RA 8479. He claims that such short period is not enough to ensure a “truly competitive market” in the supposed oligopoly of the oil industry. Again, his statement is not backed up by evidentiary basis. He offers no substantial proof that Congress, in deciding to lift price controls five months from the effectivity of RA 8479, gravely abused its discretion. To repeat, it is not within the province of the judiciary to determine whether five months is indeed short and, for that matter, what length of time is adequate. That is a matter of legislation addressed to the discretion of our policy makers.
It is basic to our form of government that the Court cannot inquire into the wisdom or expediency of the acts of the executive or the legislative department, unless there is a clear showing of constitutional infirmity or grave abuse of discretion amounting to lack or excess of jurisdiction. [Tañada vs. Angara, supra; Santiago vs. Guingona Jr., supra. See also Garcia vs. Comelec, 227 SCRA 100, October 5, 1993; Tañada vs. Cuenco, 103 Phil 1051, February 28, 1957; Magtajas v.s Pryce Properties Corp., 223 SCRA 255, July 20, 1994.] “By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. Mere abuse of discretion is not enough. It must be grave abuse of discretion, as when the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law.” [Tañada v.s Angara, supra, citing Zarate vs. Olegario, 260 SCRA 1; October 7, 1996; San Sebastian College vs. Court of Appeals, 197 SCRA 138, 144, May 15, 1991; Commissioner of Internal Revenue vs. Court of Tax Appeals, 195 SCRA 444, 458, March 20, 1991; Simon vs. Civil Service Commission, 215 SCRA 410, November 5, 1992; Bustamante vs. Commissioner on Audit, 216 SCRA 134, 136, November 27, 1992.] These jurisprudential elements of arbitrariness, despotism, passion and hostility have not been shown to exist under the present circumstances.
Market Share of New Players Has Increased Under RA 8479
Historically, deregulation as a policy in the downstream oil industry was begun in 1996 when new players started to set up and operate their businesses in the country. That was practically a full three years of operations, the last two of which saw no significant barriers in terms of tariff differential, minimum inventory or predatory pricing.
Obviously, the conditions prevailing when the court struck down RA 8180 two years ago have not been proven to be prevalent at present. In 1996, the new players had a market share of barely one percent. [Solicitor General’s Memorandum, p. 44.] The new players have since expanded or increased in number (46 as of June 30, 1999), and they now have about nine percent share of the market. [Ibid.] Significantly, these new players have intervened in this case in defense of the law. These are the little Davids who claim that with RA 8479 as their slingshot, they can, given enough time, fight and win against the three erstwhile unbeatable Goliaths. Indeed, they believe that the questioned provision has given them the impetus to compete and thereby eventually show the benefits of deregulation; namely, the best products at the cheapest prices.
With this factual backdrop and in the dire absence of contrary proof, it would be specious to conclude that under the aegis of Section 19 of RA 8479, the Big Three have restrained trade or unduly restricted competition.
Moreover, the three provisions in RA 8180 which were adjudged abhorrent to the fundamental principles of free enterprise are no longer found in RA 8479. The depletion of the Oil Price Stabilization Fund, the extraneous factor that was considered by the President in accelerating the implementation of full deregulation under RA 8180, was no longer taken into account in the present milieu. The Court’s reasons for declaring the unconstitutionality of RA 8180 are, therefore, not germane to the validity of RA 8479. The petitioner cannot rely on the same rationale for the purpose of successfully assailing RA 8479. Indeed, he admits that “the Tatad and Lagman cases x x x did not consider and adjudicate on the lifting of price control per se, under RA 8180, as an issue.”
In sum, I make no secret of my sympathy for petitioner’s frustration at the inability of our government to arrest the spiraling cost of fuel and energy. [During the Oral Argument on July 13, 1999, I compared petitioner to a Don Quixote bravely battling petroleum-powered windmills. If only for his gutsy Quixotic quest, I have, like many members of the Court, lent a sympathetic ear to petitioner, not only in this case but also in the earlier Tatad in which I wrote a Concurring Opinion to the Court’s Decision striking down RA 8180, the Oil Deregulation Law then.] I hear the cry of the poor that life has become more miserable day by day. I feel their anguish, pain and seeming hopelessness in securing their material needs.
However, the power to lower petroleum prices through the adoption or the rejection of viable economic policies or theories does not lie in the Court or its members. Furthermore, absent sufficient factual evidence and legal moorings, I cannot vote to declare a law or any provision thereof to be unconstitutional simply because, theoretically, such action may appear to be wise or beneficial or practical. Neither can I attribute grave abuse of discretion to another branch of government without an adequate showing of patent arbitrariness, whim or caprice. Should I do so, I myself will be gravely abusing my discretion, the very evil that petitioner attributes to the legislature.
WHEREFORE, I vote to DISMISS the Petition.
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