I fully concur in the ponencia of Justice Consuelo Ynares-Santiago. What I would like to stress here and now is that, contrary to certain ill-informed comments in media, petitioner’s pleadings were thoroughly dissected at the hearing where he and his counsel as well as the respondents amply presented their arguments. Questions of law and policy were also illuminated from different perspectives in sessions and in memoranda internally exchanged by members of the Court. Right away, it must be added, no delay attended the resolution of this petition. For while the Constitution allows two years, this case was decided en banc in less than half that period, from the time of submission of the parties’ memoranda. Below is a full presentation of my view on the controversy generated by petitioner’s insistence that the Court overturn an act passed by his own branch of government and approved by the Chief Executive.
At issue in this special civil action for certiorari under Rule 65 is the constitutionality of Sec. 19 of Republic Act No. 8479,1 entitled “An Act Deregulating the Downstream Oil Industry and for other Purposes”. The law was enacted pursuant to the policy of the State to liberalize and deregulate the downstream oil industry. R.A. 8479 is the remedial legislation passed by Congress to cure the infirmities found in Republic Act No. 8180, the first oil industry deregulation law, otherwise known as the “Downstream Oil Industry Deregulation Act of 1996”.
In an en banc decision promulgated on November 5, 1997, the Court declared R.A. 8180 unconstitutional for having transgressed the constitutional prohibition against monopolies and combinations in restraint of trade, specifically mandated in Section 19, Article XII of the Constitution. Consequently, Executive Order No. 392 (E.O. 392) implementing the provision of said law was voided. On December 3, 1997, the motions for reconsideration were denied for utter lack of merit.
Now before us is a challenge to the second oil industry deregulation law, R.A. 8479. The relevant factual and procedural antecedents of the present petition are as follows:
In 1992, the Philippine government welcomed more liberal economic policies and started the ground work for privatization of some government-owned or controlled corporations and deregulation of the oil industry. In due time, Congress enacted Republic Act No. 7638 on December 9, 1992. It created the Department of Energy (DOE). Among others, it was tasked, at the end of four years from the effectivity of R.A. No. 7638 and upon approval of the President, to institute the “programs and the timetable for the deregulation of appropriate projects and activities of the energy industry.”2
Following the intent of R.A. 7638, the Philippine National Oil Company (PNOC) sold 40% of its equity in Petron Corporation to the Aramco Overseas Company.
Sometime in March 1996, Congress made that daring step towards the realization of liberating the oil industry from government regulation and enacted R.A. 8180. On February 8, 1997, President Fidel V. Ramos issued E.O. 392, which signaled the implementation or start of deregulation in the oil industry.
Senator Francisco Tatad and Congressmen Enrique Garcia, Edcel Lagman, Joker Arroyo and Wigberto Tañada, among others, filed separate petitions docketed as G.R. Nos. 124360 and 127867, before the Court. The petitioners contended that some of the provisions of R.A. No. 8180 violated Section 19 of Article XII of the 1987 Constitution, which states:
“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.”
The challenged provisions in R.A. 8180 were:
(1) the provision on tariff differential found in Section 5 (b) which states:
“Section 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.”
(2) the minimum inventory clause, in Section 6 which provides:
“Section 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.”
(3) the predatory pricing scheme in Section 9:
“Section 9 – To ensure fair competition and prevent cartels and monopolies in the downstream oil industry, the following acts shall be prohibited:
x x x
“(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.”
In declaring provisions of R.A. 8180 unconstitutional, the Court held:
“…Petron, Shell and Caltex stand as the only major league players in the oil market….The tariff differential of 4% therefore works to their immense benefit…New players that intend to equalize the market power of Petron, Shell and Caltex by building refineries of their own will have to spend billions of pesos. Those who will not build refineries but compete with them will suffer the huge disadvantage of increasing their product cost by 4%. They will be competing on an uneven field.
“The provision on inventory widens the balance of advantage of Petron, Shell and Caltex against prospective new players. Petron, Shell and Caltex can easily comply with the inventory requirement of R.A. No. 8180 in view of their existing storage facilities. Prospective competitors again will find compliance with this requirement difficult as it will entail a prohibitive cost. . . .
“Finally, we come to the provision on predatory pricing which is defined as ‘…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.’…The ban on predatory pricing cannot be analyzed in isolation. Its validity is interlocked with the barriers imposed by R.A. No. 8180 on the entry of new players.”3
That decision came under sharp attack by critics who accused the Court of improvidently intervening in the economic affairs of the State. Economists and businessmen remarked that the decision was a major blow to economic reforms and an additional burden to the government’s already huge budget deficit as it would require reinstating a subsidy on oil products.4 Pertinent portions of the Decision decreed:
“With this Decision, some circles will chide the Court for interfering with an economic decision of Congress. Such criticism is charmless for the Court is annulling R.A. No. 8180 not because it disagrees with deregulation as an economic policy but because as cobbled by Congress in its present form, the law violates the Constitution. The right call therefor should be for Congress to write a new oil deregulation law that conforms with the Constitution and not for this Court to shirk its duty of striking down a law that offends the Constitution….Indeed when confronted by a law violating the Constitution, the Court has no option but to strike it down dead….Hence, for as long as the Constitution reigns supreme so long will this Court be vigilant in upholding the economic rights of our people especially from the onslaught of the powerful. Our defense of the people’s economic rights may appear heartless because it cannot be half-hearted.
IN VIEW WHEREOF, the petitions are granted. R.A. No. 8180 is declared unconstitutional and E.O. No. 372  void.”5
Public respondents filed their consolidated motion for reconsideration. Some of the new players, in the industry: Eastern Petroleum Corp., Seaoil Petroleum Corp., Subic Bay Distribution, Inc., TWA, Inc., and Dubphil Gas moved to intervene and aired their stand against the total nullification of R.A. 8180. They also averred that they were in favor of declaring the three offensive provisions unconstitutional. Petitioner Enrique T. Garcia, likewise, filed a partial motion for reconsideration and pushed for a return only to partial deregulation in which the main features of deregulation would be allowed free reign, but the retail price of oil products would still be regulated through the Energy Regulatory Board.
The Court found no merit in the motion for reconsideration, motion for intervention, and partial motion for reconsideration. Despite the separability clause, the Court ruled that the three questioned provisions cannot be struck down alone, for they were the ones intended to carry out the policy of the law as embodied in Section 2.6
On the question of the validity of E.O. 392, the Court held that the Executive Department failed to follow faithfully the standards set by R.A. 8180 when it considered the extraneous factor of depletion of the Oil Price Stabilization Fund (OPSF) fund, instead of limiting the basis for the acceleration of full deregulation of the industry to only two factors, viz: (1) the time when the prices of crude oil and petroleum products in the world market are declining, and (2) the time when the exchange rate of the peso in relation to the US dollar is stable.7 By considering another factor, the Executive Department rewrote the standards set forth in R.A. 8180.8 In light of the uncertainty of the consideration given by the Executive department to the depletion of the OPSF fund for the full deregulation of the oil industry, we ruled that E.O. 392 constituted a misapplication of R.A. 8180. In sum, the implementing order was found void, while the basic law was held unconstitutional.
On reconsideration, our December 3, 1997 Resolution stressed that R.A. 8180 is unconstitutional because (1) it gave more power to an already powerful oil oligopoly; (2) it blocked the entry of effective competitors; and (3) it will sire an even more powerful oligopoly whose unchecked power will prejudice the interest of the consumers and compromise the general welfare.9 The Court reiterated, however, that there was no impediment in re-enacting R.A. 8180 minus the provisions which are anti-competition.
Consequently, Congress fast-tracked a new oil deregulation law, R.A. 8479, which was approved and duly signed on February 10, 1998. It took effect on February 12, 1998 upon the completion of its publication in a newspaper of general circulation.
Dissatisfied with the amendments incorporated into the new law by his own colleagues in Congress, Honorable Enrique T. Garcia filed the instant petition.
The Court is the ultimate guardian of our Constitution. By virtue of its power of judicial review, it is duty-bound in an appropriate case to ascertain whether a law is free from constitutional flaws. While favoring free competition in the oil industry, the Court struck down R.A. 8180 because of provisions therein that contravened the basic law, our Constitution. Before dwelling into the issues now raised by the petitioner, we must determine whether R.A. 8479 truly cured the invalid portions of R.A. 8180. When we advocated vigilance in upholding the economic rights of our people, we truly hoped that Congress would address the defects of R.A. 8180 and not re-enact R.A. 8180 through the guise of R.A. 8479.
It bears recalling, however, that when the Supreme Court mediates to allocate constitutional boundaries or invalidates the acts of a coordinate body, what it is upholding is not its own supremacy but the supremacy of the Constitution. With this in mind, we now focus on the provisions of R.A. 8479, in particular the 4% tariff differential, minimum inventory level, and predatory pricing provisions, which aim to prevent the big three oil companies from taking advantage of deregulation as a means of cartelizing their operations, and thereby result in monopolistic and oligopolistic practices condemned by the basic law of the land.
First, the 4% tariff differential. On December 31, 1997, after the Court declared with finality that R.A. 8180 is unconstitutional, President Ramos issued Executive Order No. 461. The Order imposed a three percent (3%) import duty on petroleum products enumerated therein. The President’s move avoided the revival of the old tariff rates of 10% on crude oil and 20% on refined oil while the legislative department was in the process of crafting a new oil deregulation law. Noteworthy, Sec. 6 of R.A. 8479 imposed the same tariff treatment on petroleum products. Section 6 reads:
“SEC. 6 – 9a) Any law to the contrary notwithstanding and starting with the effectivity of this Act, a single and uniform tariff duty shall be imposed and collected both on imported crude oil and imported refined petroleum products at the rate of three percent (3%): Provided, however, That the President of the Philippines may, in the exercise of his powers, reduce such tariff rate when on his judgment such reduction is warranted, pursuant to Republic Act No. 1937, as amended, otherwise known as the “Tariff and Customs Code”: Provided, further, That beginning January 1, 2004 or upon implementation of the Uniform Tariff Program under the World Trade Organization and ASEAN Free Trade Area commitments, the tariff rate shall be automatically adjusted to the appropriate level notwithstanding the provisions under this Section.”
Second, the minimum inventory level requirement. R.A. 8479 eliminated the provision in R.A. 8180 requiring the refiners and importers to maintain a minimum inventory equivalent to ten percent (10%) of their respective annual sales volume or forty (40) days’ supply. The minimum inventory requirement was removed, giving the new entrants opportunities to use their resources to be more competitive.
Third, predatory pricing. In the December 3, 1997 Resolution of the Court in G.R. Nos. 124360 and 127867, we expressed the view that the definition of predatory pricing was too loose to be a real deterrent.10 Congressman Dante O. Tiñga acknowledged in his explanatory note of House Bill 10057 (H.B. 10057) that the definition of predatory pricing needed specificity, particularly with respect to the definitive benchmark price and the express anti-competitive intent. He suggested the Areeda-Turner test and proposed to redefine predatory pricing. Section 11 par. (b) of R.A. 8479 adopted Congressman Tiñga’s recommendation, to wit:
“(b) Predatory pricing which means selling or offering to sell any oil product at a price below the seller’s or offeror’s average variable cost for the purpose of destroying competition, eliminating a competitor or discouraging a potential competitor from entering the market: Provided, however, That pricing below average variable cost in order to match the lower price of the competitor and not for the purpose of destroying competition shall not be deemed predatory pricing. For purposes of this prohibition, ‘variable cost’ as distinguished from ‘fixed cost’, refers to costs such as utilities or raw materials, which vary as the output increases or decreases and ‘average variable cost’ refers to the sum of all variable costs divided by the number of units of outputs.”
To strengthen the anti-trust safeguards of R.A. 8479, respondents argue that there are enough provisions to encourage entry of new participants. For instance, R.A. 8479 allows for active participation of the private sector and cooperatives in the retail of petroleum through joint ventures to establish gasoline stations. Moreover, R.A. 8479 requires initial public offering of shares equivalent to 10% of the capital investments by oil companies. Respondents also cite that the enforcement of monitoring activities by the DOE encourages consumer vigilance over unwarranted increase in the prices of petroleum products. Another safeguard against collusion among oligopolists is the creation of a task force with members from the DOE and the Department of Justice (DOJ) to investigate complaints for violations of R.A. 8479. They assert that the mere dominance of Petron, Pilipinas Shell, and Caltex, is not per se a combination in restraint of trade. Combination in restraint of trade, they claim, is the means to achieve monopoly.
Petitioner Garcia adverts to oil deregulation in phases. The new oil deregulation law has two phases: (1) the transition phase and (2) the full deregulation phase.
During the transition period, all non-pricing aspects were lifted. Although the Oil Price Stabilization Fund was abolished, a buffer fund11 was created to cover increases in the prices of petroleum products, except premium gasoline. The Automatic Oil Pricing Mechanism was maintained to approximate the domestic prices of petroleum products in the international market. The Energy Regulatory Board (ERB) approved a market-oriented formula to determine the Wholesale Posted Price of petroleum products based solely on the changes of either the Singapore Posting of refined petroleum products, the Singapore Import Parity or the crude landed cost.
After the transition phase comes full deregulation as provided by Sec. 19 of R.A. 8479, which reads thus:
“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 Department of Energy (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.”12
Note that the abovecited transition phase of five months could be abbreviated when public interest so requires. The President’s power to accelerate the start of full deregulation, however, depended upon the recommendation of the Departments of Energy and Finance.
Accordingly as recommended, on March 14, 1998, President Ramos issued E.O. 471 to accelerate the implementation of full deregulation. Pertinently this E.O., which implements R.A. 8479, provides:
“WHEREAS, Republic Act No. 7638, otherwise known as the ‘Department of Energy Act of 1992,’ provides that, ‘at the end of four years from its effectivity last December 1992, the Department [of Energy] shall, upon approval of the President, institute the programs and timetable of deregulation of appropriate energy projects and activities of the energy sector;’
“WHEREAS, Section 19 of Republic Act No. 8479, otherwise known as the ‘Downstream Oil Industry Deregulation Act of 1998,’ provides that [T]that ‘when the public interest so requires, the President may accelerate the start of full deregulation upon the recommendation of the Department of Energy (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;’
“WHEREAS, pursuant to the joint recommendation of the Department of Energy and the Department of Finance, and in the interest of the consuming public, recent developments favor the acceleration of the start of full deregulation of the downstream oil industry because: (i) the prices of crude oil and petroleum products in the world market are beginning to be stable and on a downtrend since January 1998; and (ii) the exchange rate of the peso in relation to the US dollar has been stable for the past three months, averaging at around P 40.00 to one US dollar;
“WHEREAS, Executive Order No. 377 dated 31 October 1996 provides for an institutional framework for the administration of the deregulated industry by defining the functions and responsibilities of various government agencies;
“WHEREAS, pursuant to Republic Act No. 8479, the deregulation of the industry will foster a truly competitive market which can better achieve the social policy objectives of fair prices and adequate, continuous supply of environmentally-clean and high quality petroleum products;
“NOW, THEREFORE, I, FIDEL V. RAMOS, President of the
, by the powers vested in me by law, do hereby declare the full deregulation of the downstream oil industry: Provided, however, That LPG, regular gasoline and kerosene shall be covered by the Automatic Pricing Formula pursuant to R.A. No. 8479.”13 Philippines
The implementing guidelines for the acceleration of full deregulation of the industry, set forth in E.O. 471, required the concurrence of two conditions, viz.: (1) the downtrend of prices of oil and petroleum products, and (2) stability of exchange rate of peso in relation to US dollar, taking into account relevant trends and prospects.
However, E.O. 471 carried an additional proviso, the transition phase was continued for LPG, regular gas and kerosene. These socially sensitive products continued to be covered by the automatic pricing mechanism until July of 1998. Only then was full deregulation of the industry effected, and the automatic pricing mechanism was also lifted for LPG, regular gas and kerosene.
Turning now to herein petition, Congressman Enrique Garcia raised the following issues to assail the provision implementing full deregulation of the oil industry:
I. SECTION 19 OF R.A. 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.
II. Said Section 19 of R.A. 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.
III. Said Section 19 of R.A. 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.
IV. Premature full deregulation under Section 19 of R.A. 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.
These issues may be synthesized into one: Whether or not the full implementation of deregulating the downstream oil industry as provided in Section 19 of R.A. 8479 violates the Constitutional mandate of free competition in a liberalized oil industry under Section 19, Article XII of the 1987 Philippine Constitution?
Petitioner Garcia principally faults Section 19 of the new R.A. 8479 as well as E.O. 471 now for violating the constitutional prohibition against monopoly, and being anti-competition.
Petitioner claims that there was a premature full deregulation under Section 19 of R.A. 8479. He protests the acceleration of the full implementation of deregulation decreed under E.O. 471. Petitioner insists that the short transition period is pro-oligopoly, anti-competition and anti-people and is patently unconstitutional because the period is too short to establish true competition in the local oil industry. True competition, he claims, exists only when there can be a sizable number of players, and at present, the new players comprise only 3% of the market share which does not put up real competition against the “Big Three” oil companies (Caltex, Shell and Petron). What he suggests is to prolong the transition phase or partial deregulation with price controls while the big oil companies are still dominating the market, to ensure the protection of the public interest and prevent the big three oligopolies from fixing the price or overpricing. He further contends that the automatic oil pricing mechanism will enable the domestic price of petroleum products to approximate and promptly reflect the price of oil in the international market. He also stressed that new players may come under an indefinite or open-ended transition phase.
Commenting on the petition, respondents claim that the propriety of full deregulation involves the wisdom of Congress and is therefore, a non-justiciable issue. They counter petitioner’s arguments by pointing out that the shortening of the transition period and acceleration of full deregulation were decreed pursuant to the joint recommendation of the DOE and DOF, based on the concurring conditions of a downtrend of crude oil in world market and the stability of the exchange rate of P 40.00 to US $ 1.
The respondents argue that the short transition period is not violative of the Constitution because the new players were given until July 1998 to set up their businesses as they have in fact, and they have captured at least 3% of the total oil market.
Respondent Petron asserts that full deregulation protects the public from the greed and exploitation of business. Petron further contends that competition can be ushered in only with the certainty of price deregulation and the short transition period would guarantee the investors that within a manageable period, they would be able to set prices, taking into account their investment and operating costs. It claims an indefinite transition period would discourage new investors because the new players had hoped that within a reasonable time, price regulation would be lifted.
The Solicitor General filed a comment on behalf of the public respondents, interposing economic arguments that price regulation reduces economic efficiency and is prejudicial to the public.14 Public respondents assert that the acceleration of full deregulation is based on existing conditions and sound economic theory.
Respondent Shell filed a rejoinder, stating that to prolong the transition period will revive the automatic pricing mechanism which means that it will only replace the mode of price regulation by still another regulatory scheme. It argues that if Sec. 19 of R.A. 8479 were to be struck down, full deregulation will never take place and it would render the entire law different from what was passed by Congress.
Petitioner counters that he is questioning the constitutionality rather than the wisdom of Sec. 19 of R.A. 8479; it is pro-oligopoly, hence patently unconstitutional. Petitioner further avers that condemnation against monopolies and combination in restraint of trade should be given legal sanction by the Court. Petitioner maintains that the nullification of Sec. 19 of R.A. 8479 will result in partial deregulation, where there will be no regulation as regards the importation of petroleum products and the establishment of gas station, but oil pricing would be regulated based on the Automatic Pricing Mechanism.
Note that during the review of R.A. 8180 by the Court in G.R. No. 127867, petitioners Edcel C. Lagman, Arroyo, et al., likewise questioned the constitutionality of Section 15 of R.A. No. 818015 as well as E.O. 39216 which provided for the implementation of full deregulation. The Court decreed thus:
“. . . Full deregulation at the end of March 1997 is mandatory and the Executive has no discretion to postpone it for any purported reason. Thus, the law is complete on the question of the final date of full deregulation. The discretion given to the President is to advance the date of full deregulation before the end of March 1997. Section 15 lays down the standard to guide the judgment of the President – he is to time it 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 US dollar is stable.
x x x
“It ought to follow that the argument that E.O. No. 392 is null and void as it was based on indeterminate standards set by R.A. 8180 must likewise fail. If that were all to the attack against the validity of E.O. No. 392, the issue need not further detain our discourse.”17
In G.R. No. 127867, Congressman Garcia filed an Urgent Motion for Partial Reconsideration from the November 5, 1997, decision of the Court. He sought to strike down only the premature full deregulation but maintain partial deregulation under R.A. No. 8180 with price controls and price mechanism based on Singapore Posted Prices. The Court resolved the issue this way:
“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 under R.A. No. 8180.’ Under 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. x x x
“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. x x x 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.”18
Now in the present petition, Garcia insists on his old plea for a return only to partial deregulation of the downstream oil industry, wherein the main features of deregulation would be permitted but the retail prices of oil products would still be regulated through an Automatic Pricing Mechanism.
However, I find his contentions to be lacking legal basis, even if his proposal appears to be expedient, or even beneficial, especially to the poor. As the Court said in Tañada vs. Tuvera,19 “[T]his Court is not called upon to rule on the wisdom of the law or to repeal it or modify it if we find it impractical. That is not our function. That function belongs to the legislator. Our task is merely to interpret and apply the law as conceived and approved by the political departments of the government in accordance with the prescribed procedure.”20
For if we allow an open-ended transition period to maintain government pricing regulation, we would have suspended the much-needed liberalization of the downstream oil industry. It would certainly run counter to the government’s policy of allowing free interplay of market forces, with minimal government supervision. In fact, it could defeat full deregulation to ensure fair competition in the downstream oil industry, where new and prospective players are on even level playing field with the Big Three.
Furthermore, to base the implementation of full deregulation on the presence of a sizable number of new investors, as petitioner would want us to do, would be to legislate a floating provision dependent on the happening of a contingent event. To do so, would be to undermine the very purpose of the law, which is to liberalize and deregulate the downstream oil industry in order to ensure a truly competitive market under a regime of fair prices, adequate and continuous supply, environmentally clean and high-quality petroleum products.
Consequently, to heed the petitioner’s prayer, this Court would have to legislate, a power granted only to Congress. The operation of a statute may be duly suspended only by authority of the legislature.21 Indeed, a suspension of a valid statute must rest upon legislative action;22 it may not be effected solely by a judicial act.23 Clearly it is a policy decision of the legislative and executive departments in whose turf we must not tread, under the principle of separation of powers. The term “political question” connotes what it means in ordinary parlance, namely, a question of policy.24 It refers to “those questions which, under the Constitution, are to be decided by the people in their sovereign capacity, or in regard to which full discretionary authority has been delegated to the legislative or executive branch of the government.”25 It is concerned with issues dependent upon the wisdom, not legality, of a particular measure.26 The judiciary does not directly settle policy issues. Under our system of government, policy issues are within the domain of the political branches of government and of the people themselves as the repository of all state powers.27
In PLDT vs. National Telecommunications Commission,28 the ultimate considerations cited in matters affecting vital industries, are the public need, public interest, and the common good. In that case, the Court said:
“Free competition in the industry may also provide the answer to a much-desired improvement in the quality and delivery of this type of public utility, to improved technology, fast and handy mobile service, and reduced user dissatisfaction.”29
Similarly, the above-mentioned considerations could undergird the nation’s energy and other economic policies. The liberalization of the oil industry is a reform program initiated by Congress to free the government from the obligation of infusing funds to subsidize increases in the prices of oil products. Such funds may now be utilized for other much needed programs with a public purpose.
Well-established is the principle that every law has in its favor the presumption of constitutionality.30 To declare a law unconstitutional, the repugnancy of that law to the Constitution must be clear and unequivocal. But we recognize that even if a law is aimed at the attainment of some public good, still its provisions cannot infringe upon constitutional rights.31 That infringement, however, must be proved and established persuasively to invalidate a provision of a law, if not the entire law itself.
Petitioner ought to have demonstrated the need for the extension of the transition period. But, in fact, he could not downplay the DOE report that new players accounted for a sizable share of the market, some 18.1 percent of the total product imports, and competing companies are keen in joining the Philippine oil industry since the full implementation of deregulation. And, as stressed by the public respondents in the rejoinder dated January 7, 1999:
“Since 1996, new players have taken a significant share in the market, to wit: (a) seven (7) new players have entered the downstream oil industry before RA No. 8180; (b) during the effectivity of RA No. 8180, twenty eight (28) new players have engaged in a number of downstream oil industry activities; and (c) three (3) new players have engaged in fuel bulk marketing, while two (2) new players have started to establish gasoline service stations immediately before and during the effectivity of RA No. 8479. At the same time, many more companies have indicated their intention to enter the downstream oil industry business.”32
The new players, according to industry experts, are gradually making a dent in the local market and their share is expected to surge in a few years when their retail stations are established.33
However, the presence or entry of numerous players in the oil industry is not a condition precedent before a full deregulated petroleum industry could be had. But we recognize that it is precisely the implementation of full deregulation that would serve to entice new players to compete against the so-called Big Three. Hopefully, this move would prevent the powerful oil companies from manipulating prices, to the prejudice of the consumers and the public in general.
The petitioner strongly manifested his fears concerning pernicious consequences of total lifting of price control in the oil industry. His main concern is that the government might be helpless in case the Big 3 (Shell, Petron and Caltex) overprice their petroleum products. But the people are not without legal recourse. The public can manifest outright objections to overpricing and report to the Department of Energy any unreasonable increase in the prices of these oil products. The monitoring power of the DOE is embodied in Sec. 14 of R.A. 8479, and its implementing rule, Section 18 of DOE Circular No. 98-03-004, thus:
“R.A. 8479, Sec. 14 – Powers and Functions of the DOE and DOE Secretary:
“(a) The DOE shall monitor and publish daily international crude oil prices, as well as follow the movements of domestic oil prices. It shall likewise monitor the quality of petroleum products and stop the operation of business involved in the sale of petroleum products which do not comply with the national standards of quality that are aligned with the national standards/protocols of quality….
x x x
“(d) Any report from any person of an unreasonable rise in the prices of petroleum products shall be immediately acted upon. For this purpose, the creation of DOE-DOJ Task Force is hereby mandated to determine within thirty (30) days the merits of the report and initiate the necessary actions warranted under the circumstances: Provided, That nothing herein shall prevent the said task force from investigating and/or filing the necessary complaint with the proper court or agency motu propio.”
Department Circular No. 98-03-004, Sec. 18 – Powers and Functions of the DOE and DOE Secretary
“The DOE shall monitor the following pursuant to Section 14 of the Act. Any misrepresentation, mislabeling, concealment or fraud, shall be subject to penalties under existing applicable laws.
“The DOE shall monitor and publish international oil prices as well as follow the movement of domestic oil prices.
(1) Price Display Boards
For the convenience of the public, all retailers of petroleum products shall display the prices of each type of petroleum product sold in gasoline stations in prominently installed price display boards with backgrounds preferably conforming to the color coding scheme for the product, such as : green for Unleaded Premium Gasoline, red for Premium Low Lead Gasoline, orange for Regular Gasoline, yellow for Diesel Fuel, and white for Kerosene. In the case of LPG (which has no product color), the price display board may be light blue in color. The numeric entries in these boards shall be at least six (6) inches in height.
The price display boards shall be properly installed and labeled not later than June 30, 1998. Failure to comply with this requirements shall be penalized pursuant to Section 24 of the Act.
(2) Unreasonable Rise in Prices
Any report from any person of an unreasonable rise in the prices of petroleum products shall be immediately acted upon by the DOE-DOJ Task Force in accordance with Section 17 of this IRR. The said Task force shall determine within thirty (30) days the merits of the report and shall initiate the necessary actions warranted under the circumstances.”
A calculus of fear and pessimism, however, does not justify the remedy petitioner seeks: that we now overturn a law enacted by Congress and approved by the Chief Executive. The Court must act on valid legal reasons that will explain why we should interfere with vital legislation.34 To strike down a provision of law we need a clear showing that what the Constitution prohibits, the statute has allowed to be done.35
Since there is no clear showing that Section 19 of R.A. 8479 has violated the constitutional prohibition against monopolies and combinations in restraint of trade, I vote that the present petition be DISMISSED.
1Rollo, pp. 40-47.
2Section 5 [b] of R.A. 7638.
3Tatad vs. Secretary of the Department of Energy, 281 SCRA 330, 359 - 360 (1997).
4See Philippine Star issue of Dec. 4, 1997.
5Supra, note 3 at 370.
6Tatad vs. Secretary of the Department of Energy, 282 SCRA 337, 354 (1997).
7Supra, note 3, at 353.
9Supra, note 6, at 358.
10Supra, see note 6 at 345.
11Section 17 of Republic Act Number 8479 – Buffer Fund: The President may, when the interest of the consumers so requires, taking into account the rise in the domestic prices of petroleum products, use the “Reserve Control Account” as a buffer fund in the amount not exceeding Two billion nine hundred million pesos (P 2,900,000,000.00) to cover increases in the prices of petroleum products, except premium gasoline, during the Transition Phase over the prices prevailing as of the date of the effectivity of this Act. x x x.
12Rollo, p. 46.
13“Annex 2” of Public Respondent’s Comment.
14See David Weimer and Aidan Vining, “Policy Analysis: Concepts and Practice, 1992 ed., pp. 124, 126- Comment – Solicitor General for Public Respondents p. 15-16. According to the article, there have been two major lines of criticism to the use of price regulation (1) regulators are quickly captured by the firms that they regulate and (2) such regulation induces inefficient and wasteful behavior. The outcome of such incentives are inefficiency and overuse of capital under rate of return regulation.
15Sec. 15. Implementation of Full Deregulation. – Pursuant to Section 5 (e) of Republic Act No. 7638, the DOE shall, upon approval of the President, implement the full deregulation of the downstream oil industry not later than March, 1997. As far as practicable, the DOE shall time the full deregulation 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 US dollar is stable. Upon the implementation of the full deregulation as provided herein, the transition phase is deemed terminated and the following laws are deemed repealed: x x x
16x x x
“WHEREAS, Section 15 of Republic Act No. 8180, otherwise known as the ‘Downstream Oil Industry Deregulation Act of 1996,’ provides that the DOE shall, upon approval of the President, implement the full deregulation of the downstream oil industry not later than March, 1997. As far as practicable, the DOE shall time the full deregulation 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 US dollar is stable;"
“WHEREAS, pursuant to the recommendation of the Department of Energy, there is an imperative need to implement the full deregulation of the downstream oil industry because of the following recent developments: (i) depletion of the buffer fund on or about 7 February 1997 pursuant to the Energy Regulatory Board’s Order dated 16 January 1997; (ii) the prices of crude oil had been stable at $ 21-$ 23 per barrel since October 1996 while prices of petroleum products in the world market had been stable since mid-December of last year. Moreover, crude oil prices are beginning to soften for the last few days while prices of some petroleum products had already declined' and (iii) the exchange rate of the peso in relation to the US dollar has been stable for the past twelve (12) months, averaging at around P 26.20 to ONE US dollar;
x x x
17Supra, note 3, at 352-353.
18Supra, note 6, at 353.
19146 SCRA 446 (1986).
20Id., at 455, 456.
2173 Am. Jur. 2d. Sec. 374.
22Id., citing Winslow v. Fleischner, 112 Or 23, 228 P 101, 34 ALR 826.
23Id., citing King v. State, 87 Tenn 304, 10 SW 509.
24Daza vs. Singson 180 SCRA 496, 500 (1989); citing Tañada vs. Cuenco, 103 Phil. 1051 (1957), Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform, 175 SCRA 343, 377 (1989).
27Valmonte vs. Belmonte, Jr., 170 SCRA 256, 268 (1989).
28190 SCRA 717 (1990).
29Id. at 737.
30Basco vs. Phil. Amusements and Gaming Corporation, 197 SCRA 52, 68 (1991); citing Yu Cong Eng vs. Trinidad, 47 Phil. 385 (1925); Salas vs. Jarencio, 46 SCRA 734 (1972); Peralta vs. COMELEC, 82 SCRA 30 (1978); Abbas vs. COMELEC, 179 SCRA 287 (1989).
31Salas vs. Jarencio, 46 SCRA 734, 749 (1972).
32Public respondents’ Rejoinder, p. 7.
33The Philippine Star, November 23, 1998 issue.
34Tolentino vs. Secretary of Finance, 235 SCRA 630, 674 (1994); citing Alalayan vs. National Power Corp., 24 SCRA 172 (1968); Cordero vs. Cabatuando, 6 SCRA 418 (1962); Sumulong vs. COMELEC, 73 Phil. 288 (1941). As of December 10, 1999, Philippine Star, p. 26, reports that “the deregulation of the oil industry under Republic Act (RA) 8479 has resulted in the entry of 53 new players, 10 of which are foreign players...Their entry has forced the industry to offer more competitive prices and products.”
35Morfe vs. Mutuc, 22 SCRA 424, 435 (1968).
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