Republic of the Philippines

SUPREME COURT

Manila

 

 

EN BANC


 

G.R. No. 124360

 

 

November 5, 1997

 

 
FRANCISCO S.  TATAD, Petitioner,

 

 

vs.
 
 

THE SECRETARY OF THE DEPARTMENT OF ENERGY AND THE SECRETARY OF THE DEPARTMENT OF FINANCE, Respondents.


 

G.R. No. 127867

 

 

November 5, 1997

 

 

EDCEL C. LAGMAN, JOKER P. ARROYO, ENRIQUE GARCIA, WIGBERTO TANADA, FLAG HUMAN RIGHTS FOUNDATION, INC., FREEDOM FROM DEBT COALITION [FDC], SANLAKAS, Petitioners,

 

 

vs.
 

 

HON.  RUBEN TORRES in his capacity as Executive Secretary, HON.  FRANCISCO VIRAY, in his capacity as Secretary of Energy, CALTEX PHILIPPINES, INC., PETRON CORPORATION and PILIPINAS SHELL CORPORATION, Respondents. 


 
D E C I S I O N 
 

PUNO, J.:

 

 

The petitions at bar challenge the constitutionality of Republic Act No. 8180 entitled “An Act Deregulating the Downstream Oil Industry and For Other Purposes”.1  R.A. No. 8180 ends twenty six (26) years of government regulation of the downstream oil industry.  Few cases carry a surpassing importance on the life of every Filipino as these petitions for the upswing and downswing of our economy materially depend on the oscillation of oil. 

 

First, the facts without the fat.  Prior to 1971, there was no government agency regulating the oil industry other than those dealing with ordinary commodities.  Oil companies were free to enter and exit the market without any government interference.  There were four [4] refining companies [Shell, Caltex, Bataan Refining Company and Filoil Refining] and six [6] petroleum marketing companies [Esso, Filoil, Caltex, Getty, Mobil and Shell], then operating in the country.2

 

In 1971, the country was driven to its knees by a crippling oil crisis.  The government, realizing that petroleum and its products are vital to national security and that their continued supply at reasonable prices is essential to the general welfare, enacted the Oil Industry Commission Act.3  It created the Oil Industry Commission [OIC] to regulate the business of importing, exporting, re-exporting, shipping, transporting, processing, refining, storing, distributing, marketing and selling crude oil, gasoline, kerosene, gas and other refined petroleum products.  The OIC was vested with the power to fix the market prices of petroleum products, to regulate the capacities of refineries, to license new refineries and to regulate the operations and trade practices of the industry.4

 

In addition to the creation of the OIC, the government saw the imperious need for a more active role of Filipinos in the oil industry.  Until the early seventies, the downstream oil industry was controlled by multinational companies.  All the oil refineries and marketing companies were owned by foreigners whose economic interests did not always coincide with the interest of the Filipino.  Crude oil was transported to the country by foreign-controlled tankers.  Crude processing was done locally by foreign-owned refineries and petroleum products were marketed through foreign-owned retail outlets.  On November 9, 1973, President Ferdinand E. Marcos boldly created the Philippine National Oil Corporation [PNOC] to break the control by foreigners of our oil industry.5  PNOC engaged in the business of refining, marketing, shipping, transporting, and storing petroleum.  It acquired ownership of ESSO Philippines and Filoil to serve as its marketing arm.  It bought the controlling shares of Bataan Refining Corporation, the largest refinery in the country.6  PNOC later put up its own marketing subsidiary PetroPhilPNOC operated under the business name PETRON Corporation.  For the first time, there was a Filipino presence in the Philippine oil market. 

 

In 1984, President Marcos through Section 8 of Presidential Decree No. 1956, created the Oil Price Stabilization Fund (OPSF) to cushion the effects of frequent changes in the price of oil caused by exchange rate adjustments or increase in the world market prices of crude oil and imported petroleum products.  The fund is used (1) to reimburse the oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustment and/or increase in world market prices of crude oil, and (2) to reimburse oil companies for cost underrecovery incurred as a result of the reduction of domestic prices of petroleum products.  Under the law, the OPSF may be sourced from: 

 

1.  any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum products subject to tax under P.D. No. 1956 arising from exchange rate adjustment,

 

2.  any increase in the tax collection as a result of the lifting of tax exemptions of government corporations, as may be determined by the Minister of Finance in consultation with the Board of Energy,

 

3.  any additional amount to be imposed on petroleum products to augment the resources of the fund through an appropriate order that may be issued by the Board of Energy requiring payment of persons or companies engaged in the business of importing, manufacturing and/or marketing petroleum products, or

 

4.  any resulting peso costs differentials in case the actual peso costs paid by oil companies in the importation of crude oil and petroleum products is less than the peso costs computed using the reference foreign exchange rate as fixed by the Board of Energy.7

 

By 1985, only three (3) oil companies were operating in the country Caltex, Shell and the government-owned PNOC

 

In May 1987, President Corazon C. Aquino signed Executive Order No. 172 creating the Energy Regulatory Board to regulate the business of importing, exporting, re-exporting, shipping, transporting, processing, refining, marketing and distributing energy resources “when warranted and only when public necessity requires.”  The Board had the following powers and functions: 

 

1.  Fix and regulate the prices of petroleum products;

 

2.  Fix and regulate the rate schedule or prices of piped gas to be charged by duly franchised gas companies which distribute gas by means of underground pipe system;

 

3.  Fix and regulate the rates of pipeline concessionaries under the provisions of R.A. No. 387, as amended;

 

4.  Regulate the capacities of new refineries or additional capacities of existing refineries and license refineries that may be organized after the issuance of (E.O. No. 172) under such terms and conditions as are consistent with the national interest; and

 

5.  Whenever the Board has determined that there is a shortage of any petroleum product, or when public interest so requires, it may take such steps as it may consider necessary, including the temporary adjustment of the levels of prices of petroleum products and the payment to the Oil Price Stabilization Fund by persons or entities engaged in the petroleum industry of such amounts as may be determined by the Board, which may enable the importer to recover its cost of importation.8

 

On December 9, 1992, Congress enacted R.A. No. 7638 which created the Department of Energy to prepare, integrate, coordinate, supervise and control all plans, programs, projects, and activities of the government in relation to energy exploration, development, utilization, distribution and conservation.9  The thrust of the Philippine energy program under the law was toward privatization of government agencies related to energy, deregulation of the power and energy industry and reduction of dependency on oil-fired plants.10  The law also aimed to encourage free and active participation and investment by the private sector in all energy activities.  Section 5 (e) of the law states that “at the end of four [4] years from the effectivity of this Act, the Department shall, upon approval of the President, institute the programs and timetable of deregulation of appropriate energy projects and activities of the energy industry.”

 

Pursuant to the policies enunciated in R.A. No. 7638, the government approved the privatization of Petron Corporation in 1993.  On December 16, 1993, PNOC sold 40% of its equity in Petron Corporation to the Aramco Overseas Company

 

In March 1996, Congress took the audacious step of deregulating the downstream oil industry.  It enacted R.A. No. 8180, entitled the “Downstream Oil Industry Deregulation Act of 1996.”  Under the deregulated environment, “any person or entity may import or purchase any quantity of crude oil and petroleum products from a foreign or domestic source, lease or own and operate refineries and other downstream oil facilities and market such crude oil or use the same for his own requirement,” subject only to monitoring by the Department of Energy.11

 

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

 

The first phase of deregulation commenced on August 12, 1996.  On February 8, 1997, the President implemented the full deregulation of the Downstream Oil Industry through E.O. No. 372

 

   The petitions at bar assail the constitutionality of various provisions of R.A. No. 8180 and E.O. No. 372

 

   In G.R. No. 124360, petitioner Francisco S. Tatad seeks the annulment of section 5 (b) of R.A. No. 8180.  Section 5 (b) provides: 

 

(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.

 

   The petition is anchored on three arguments: 

 

First, that the imposition of different tariff rates on imported crude oil and imported refined petroleum products violates the equal protection clause.  Petitioner contends that the 3%-7% tariff differential unduly favors the three existing oil refineries and discriminates against prospective investors in the downstream oil industry who do not have their own refineries and will have to source refined petroleum products from abroad. 

 

Second, that the imposition of different tariff rates does not deregulate the downstream oil industry but instead controls the oil industry, contrary to the avowed policy of the law.  Petitioner avers that the tariff differential between imported crude oil and imported refined petroleum products bars the entry of other players in the oil industry because it effectively protects the interest of oil companies with existing refineries.  Thus, it runs counter to the objective of the law “to foster a truly competitive market.”

 

Third, that the inclusion of the tariff provision in section 5 (b) of R.A. No. 8180 violates Section 26 (1) Article VI of the Constitution requiring every law to have only one subject which shall be expressed in its title.  Petitioner contends that the imposition of tariff rates in section 5 (b) of R.A. No. 8180 is foreign to the subject of the law which is the deregulation of the downstream oil industry. 

 

In G.R. No. 127867, petitioners Edcel C. Lagman, Joker P. Arroyo, Enrique Garcia, Wigberto Tañada, Flag Human Rights Foundation, Inc., Freedom from Debt Coalition (FDC) and Sanlakas contest the constitutionality of Section 15 of R.A. No. 8180 and E.O. No. 392.  Section 15 provides: 

 

SEC. 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:

 

xxx  xxx  xxx

 

   E.O. No. 392 states in full, viz.: 

 

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 time table of deregulation of appropriate energy projects and activities of the energy sector;”

 

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 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;

 

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. 8180, 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 Republic of the Philippines, by the powers vested in me by law, do hereby declare the full deregulation of the downstream oil industry.

 

In assailing Section 15 of R.A. No. 8180 and E.O. No. 392, petitioners offer the following submissions:

 

First, Section 15 of R.A. No. 8180 constitutes an undue delegation of legislative power to the President and the Secretary of Energy because it does not provide a determinate or determinable standard to guide the Executive Branch in determining when to implement the full deregulation of the downstream oil industry.  Petitioners contend that the law does not define when it is practicable for the Secretary of Energy to recommend to the President the full deregulation of the downstream oil industry or when the President may consider it practicable to declare full deregulation.  Also, the law does not provide any specific standard to determine when the prices of crude oil in the world market are considered to be declining nor when the exchange rate of the peso to the US dollar is considered stable.

 

Second, petitioners aver that E.O. No. 392 implementing the full deregulation of the downstream oil industry is arbitrary and unreasonable because it was enacted due to the alleged depletion of the OPSF fund – a condition not found in R.A. No. 8180.

 

Third, Section 15 of R.A. No. 8180 and E.O. No. 392 allow the formation of a de facto cartel among the three existing oil companies  Petron, Caltex, and Shell in violation of the constitutional prohibition against monopolies, combinations in restraint of trade and unfair competition.

 

Respondents, on the other hand, fervently defend the constitutionality of R.A. No. 8180 and E.O. No. 392.  In addition, respondents contend that the issues raised by the petitions are not justiciable as they pertain to the wisdom of the law.  Respondents further aver that petitioners have no locus standi as they did not sustain nor will they sustain direct injury as a result of the implementation of R.A. No. 8180

 

The petitions were heard by the Court on September 30, 1997.  On October 7, 1997, the Court ordered the private respondents oil companies “to maintain the status quo and to cease and desist from increasing the prices of gasoline and other petroleum fuel products for a period of thirty (30) days…subject to further orders as conditions may warrant.”

 

We shall now resolve the petitions on the merit.  The petitions raise procedural and substantive issues bearing on the constitutionality of R.A. No. 8180 and E.O. No. 392.  The procedural issues are:  (1) whether or not the petitions raise a justiciable controversy, and (2) whether or not the petitioners have the standing to assail the validity of the subject law and executive order.  The substantive issues are:  (1) whether or not section 5 (b) violates the one title one subject requirement of the Constitution; (2) whether or not the same section violates the equal protection clause of the Constitution; (3) whether or not Section 15 violates the constitutional prohibition on undue delegation of power; (4) whether or not E.O. No. 392 is arbitrary and unreasonable; and (5) whether or not R.A. No. 8180 violates the constitutional prohibition against monopolies, combinations in restraint of trade and unfair competition. 

 

We shall first tackle the procedural issues.  Respondents claim that the avalanche of arguments of the petitioners assail the wisdom of R.A. No. 8180.  They aver that deregulation of the downstream oil industry is a policy decision made by Congress and it cannot be reviewed, much less be reversed by this Court.  In constitutional parlance, respondents contend that the petitions failed to raise a justiciable controversy. 

 

Respondents’ joint stance is unnoteworthy.  Judicial power includes not only the duty of the courts to settle actual controversies involving rights which are legally demandable and enforceable, but also the duty to determine whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the government.12  The courts, as guardians of the Constitution, have the inherent authority to determine whether a statute enacted by the legislature transcends the limit imposed by the fundamental law.  Where a statute violates the Constitution, it is not only the right but the duty of the judiciary to declare such act as unconstitutional and void.13  We held in the recent case of Tañada vs. Angara:14

 

xxx  xxx  xxx

 

In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition no doubt raises a justiciable controversy.  Where an action of the legislative branch is seriously alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute.  The question thus posed is judicial rather than political.  The duty to adjudicate remains to assure that the supremacy of the Constitution is upheld.  Once a controversy as to the application or interpretation of a constitutional provision is raised before this Court, it becomes a legal issue which the Court is bound by constitutional mandate to decide.

 

Even a side glance at the petitions will reveal that petitioners have raised constitutional issues which deserve the resolution of this Court in view of their seriousness and their value as precedents.  Our statement of facts and definition of issues clearly show that petitioners are assailing R.A. No. 8180 because its provisions infringe the Constitution and not because the law lacks wisdom.  The principle of separation of power mandates that challenges on the constitutionality of a law should be resolved in our courts of justice while doubts on the wisdom of a law should be debated in the halls of Congress.  Every now and then, a law may be denounced in court both as bereft of wisdom and constitutionally infirmed.  Such denunciation will not deny this Court of its jurisdiction to resolve the constitutionality of the said law while prudentially refusing to pass on its wisdom. 

 

The effort of respondents to question the locus standi of petitioners must also fall on barren ground.  In language too lucid to be misunderstood, this Court has brightlined its liberal stance on a petitioner’s locus standi where the petitioner is able to craft an issue of transcendental significance to the people.15  In Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs. Tan,16 We stressed:

 

xxx  xxx  xxx

 

Objections to taxpayers’ suit for lack of sufficient personality, standing or interest are, however, in the main procedural matters.  Considering the importance to the public of the cases at bar, and in keeping with the Court’s duty, under the 1987 Constitution, to determine whether or not the other branches of government have kept themselves within the limits of the Constitution and the laws and that they have not abused the discretion given to them, the Court has brushed aside technicalities of procedure and has taken cognizance of these petitions.

 

There is not a dot of disagreement between the petitioners and the respondents on the far reaching importance of the validity of R.A. No. 8180 deregulating our downstream oil industry.  Thus, there is no good sense in being hypertechnical on the standing of petitioners for they pose issues which are significant to our people and which deserve our forthright resolution. 

 

We shall now track down the substantive issues.  In G.R. No. 124360 where petitioner is Senator Tatad, it is contended that Section 5 (b) of R.A. No. 8180 on tariff differential violates the provision17 of the Constitution requiring every law to have only one subject which should be expressed in its title.  We do not concur with this contention.  As a policy, this Court has adopted a liberal construction of the one title one subject rule.  We have consistently ruled18 that the title need not mirror, fully index or catalogue all contents and minute details of a law.  A law having a single general subject indicated in the title may contain any number of provisions, no matter how diverse they may be, so long as they are not inconsistent with or foreign to the general subject, and may be considered in furtherance of such subject by providing for the method and means of carrying out the general subject.19  We hold that Section 5 (b) providing for tariff differential is germane to the subject of R.A. No. 8180 which is the deregulation of the downstream oil industry.  The section is supposed to sway prospective investors to put up refineries in our country and make them rely less on imported petroleum.20  We shall, however, return to the validity of this provision when We examine its blocking effect on new entrants to the oil market. 

 

We shall now slide to the substantive issues in G.R. No. 127867.  Petitioners assail Section 15 of R.A. No. 8180 which fixes the time frame for the full deregulation of the downstream oil industry.  We restate its pertinent portion for emphasis, viz.: 

 

SEC. 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…

 

Petitioners urge that the phrases “as far as practicable,” “decline of crude oil prices in the world market” and “stability of the peso exchange rate to the US dollar” are ambivalent, unclear and inconcrete in meaning.  They submit that they do not provide the “determinate or determinable standards” which can guide the President in his decision to fully deregulate the downstream oil industry.  In addition, they contend that E.O. No. 392 which advanced the date of full deregulation is void for it illegally considered the depletion of the OPSF fund as a factor. 

 

The power of Congress to delegate the execution of laws has long been settled by this Court.  As early as 1916 in Compania General de Tabacos de Filipinas vs. The Board of Public Utility Commissioners,21 this Court through Mr. Justice Moreland, held that “the true distinction is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority or discretion as to its execution, to be exercised under and in pursuance of the law.  The first cannot be done; to the latter no valid objection can be made.”  Over the years, as the legal engineering of men’s relationship became more difficult, Congress has to rely more on the practice of delegating the execution of laws to the executive and other administrative agencies.  Two tests have been developed to determine whether the delegation of the power to execute laws does not involve the abdication of the power to make law itself.  We delineated the metes and bounds of these tests in Eastern Shipping Lines, Inc. vs. POEA,22 thus:

 

There are two accepted tests to determine whether or not there is a valid delegation of legislative power, viz:  the completeness test and the sufficient standard test.  Under the first test, the law must be complete in all its terms and conditions when it leaves the legislative such that when it reaches the delegate the only thing he will have to do is to enforce it.  Under the sufficient standard test, there must be adequate guidelines or limitations in the law to map out the boundaries of the delegate’s authority and prevent the delegation from running riot.  Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not allowed to step into the shoes of the legislature and exercise a power essentially legislative.

 

The validity of delegating legislative power is now a quiet area in our constitutional landscape.  As sagely observed, delegation of legislative power has become an inevitability in light of the increasing complexity of the task of government.  Thus, courts bend as far back as possible to sustain the constitutionality of laws which are assailed as unduly delegating legislative powers.  Citing Hirabayashi vs. United States23 as authority, Mr. Justice Isagani A. Cruz states “that even if the law does not expressly pinpoint the standard, the courts will bend over backward to locate the same elsewhere in order to spare the statute, if it can, from constitutional infirmity.”24

 

Given the groove of the Court’s rulings, the attempt of petitioners to strike down Section 15 on the ground of undue delegation of legislative power cannot prosper.  Section 15 can hurdle both the completeness test and the sufficient standard test.  It will be noted that Congress expressly provided in R.A. No. 8180 that full deregulation will start at the end of March 1997, regardless of the occurrence of any event.  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. 

 

Petitioners contend that the words “as far as practicable,” “declining” and “stable” should have been defined in R.A. No. 8180 as they do not set determinate or determinable standards.  The stubborn submission deserves scant consideration.  The dictionary meanings of these words are well settled and cannot confuse men of reasonable intelligence.  Webster defines “practicable” as meaning possible to practice or perform, “decline” as meaning to take a downward direction, and “stable” as meaning firmly established.25  The fear of petitioners that these words will result in the exercise of executive discretion that will run riot is thus groundless.  To be sure, the Court has sustained the validity of similar, if not more general standards in other cases.26

 

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.  But petitioners further posit the thesis that the Executive misapplied R.A. No. 8180 when it considered the depletion of the OPSF fund as a factor in fully deregulating the downstream oil industry in February 1997.  A perusal of Section 15 of R.A. No. 8180 will readily reveal that it only enumerated two factors to be considered by the Department of Energy and the Office of the President, 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.  Section 15 did not mention the depletion of the OPSF fund as a factor to be given weight by the Executive before ordering full deregulation.  On the contrary, the debates in Congress will show that some of our legislators wanted to impose as a pre-condition to deregulation a showing that the OPSF fund must not be in deficit.27  We therefore hold that the Executive department failed to follow faithfully the standards set by R.A. No. 8180 when it considered the extraneous factor of depletion of the OPSF fund.  The misappreciation of this extra factor cannot be justified on the ground that the Executive department considered anyway the stability of the prices of crude oil in the world market and the stability of the exchange rate of the peso to the dollar.  By considering another factor to hasten full deregulation, the Executive department rewrote the standards set forth in R.A. 8180.  The Executive is bereft of any right to alter either by subtraction or addition the standards set in R.A. No. 8180 for it has no power to make laws.  To cede to the Executive the power to make law is to invite tyranny, indeed, to transgress the principle of separation of powers.  The exercise of delegated power is given a strict scrutiny by courts for the delegate is a mere agent whose action cannot infringe the terms of agency.  In the cases at bar, the Executive co-mingled the factor of depletion of the OPSF fund with the factors of decline of the price of crude oil in the world market and the stability of the peso to the US dollar.  On the basis of the text of E.O. No. 392, it is impossible to determine the weight given by the Executive department to the depletion of the OPSF fund.  It could well be the principal consideration for the early deregulation.  It could have been accorded an equal significance.  Or its importance could be nil.  In light of this uncertainty, We rule that the early deregulation under E.O. No. 392 constitutes a misapplication of R.A. No. 8180

 

We now come to grips with the contention that some provisions of R.A. No. 8180 violate Section 19 of Article XII of the 1987 Constitution.  These provisions are: 

 

(1) Section 5 (b) which states, “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) Section 6 which states, “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;” and

 

(3) Section 9 (b) which states, “To ensure fair competition and prevent cartels and monopolies in the downstream oil industry, the following acts shall be prohibited:

 

xxx  xxx  xxx

 

(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.

 

On the other hand, Section 19 of Article XII of the Constitution allegedly violated by the aforestated provisions of R.A. No. 8180 mandates:  “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.”

 

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.28  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.29  Combination in restraint of trade refers to the means while monopoly refers to the end.30

 

Article 186 of the Revised Penal Code and Article 28 of the New Civil Code breathe life to this constitutional policy.  Article 186 of the Revised Penal Code penalizes monopolization and creation of combinations in restraint of trade,31 while Article 28 of the New Civil Code makes any person who shall engage in unfair competition liable for damages.32

 

Respondents aver that Sections 5 (b), 6 and 9 (b) implement the policies and objectives of R.A. No. 8180.  They explain that the 4% tariff differential is designed to encourage new entrants to invest in refineries.  They stress that the inventory requirement is meant to guaranty continuous domestic supply of petroleum and to discourage fly-by-night operators.  They also submit that the prohibition against predatory pricing is intended to protect prospective entrants.  Respondents manifested to the Court that new players have entered the Philippines after deregulation and have now captured 3%-5% of the oil market. 

 

The validity of the assailed provisions of R.A. No. 8180 has to be decided in light of the letter and spirit of our Constitution, especially Section 19, Article XII.  Beyond doubt, the Constitution committed us to the free enterprise system but it is a system impressed with its own distinctness.  Thus, while the Constitution embraced free enterprise as an economic creed, it did not prohibit per se the operation of monopolies which can, however, be regulated in the public interest.33  Thus, too, our free enterprise system is not based on a market of pure and unadulterated competition where the State pursues a strict hands-off policy and follows the let-the-devil devour the hindmost rule.  Combinations in restraint of trade and unfair competitions are absolutely proscribed and the proscription is directed both against the State as well as the private sector.34  This distinct free enterprise system is dictated by the need to achieve the goals of our national economy as defined by Section 1, Article XII of the Constitution which are:  more equitable distribution of opportunities, income and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all, especially the underprivileged.  It also calls for the State to protect Filipino enterprises against unfair competition and trade practices. 

 

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. 8180We 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.”35  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.” 

 

Again, we underline in scarlet that the fundamental principle espoused by Section 19, Article XII of the Constitution is competition for it alone can release the creative forces of the market.  But the competition that can unleash these creative forces is competition that is fighting yet is fair.  Ideally, this kind of competition requires the presence of not one, not just a few but several players.  A market controlled by one player [monopoly] or dominated by a handful of players [oligopoly] is hardly the market where honest-to-goodness competition will prevail.  Monopolistic or oligopolistic markets deserve our careful scrutiny and laws which barricade the entry points of new players in the market should be viewed with suspicion. 

 

Prescinding from these baseline propositions, we shall proceed to examine whether the provisions of R.A. No. 8180 on tariff differential, inventory reserves, and predatory prices imposed substantial barriers to the entry and exit of new players in our downstream oil industry.  If they do, they have to be struck down for they will necessarily inhibit the formation of a truly competitive market.  Contrariwise, if they are insignificant impediments, they need not be stricken down. 

 

In the cases at bar, it cannot be denied that our downstream oil industry is operated and controlled by an oligopoly, a foreign oligopoly at that.  Petron, Shell and Caltex, stand as the only major league players in the oil market.  All other players belong to the lilliputian league.  As the dominant players, Petron, Shell and Caltex, boast of existing refineries of various capacities.  The tariff differential of 4% therefore works to their immense benefit.  Yet, this is only one edge of the tariff differential.  The other edge cuts and cuts deep in the heart of their competitors.  It erects a high barrier to the entry of new players.  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 argument that the 4% tariff differential is desirable because it will induce prospective players to invest in refineries puts the cart before the horse.  The first need is to attract new players and they cannot be attracted by burdening them with heavy disincentives.  Without new players belonging to the league of Petron, Shell and Caltex, competition in our downstream oil industry is an idle dream. 

 

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.  The construction cost of storage facilities and the cost of inventory can thus scare prospective players.  Their net effect is to further occlude the entry points of new players, dampen competition and enhance the control of the market by the three [3] existing oil companies. 

 

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.”  Respondents contend that this provision works against Petron, Shell and Caltex and protects new entrants.  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.  The inquiry should be to determine whether predatory pricing on the part of the dominant oil companies is encouraged by the provisions in the law blocking the entry of new players.  Text-writer Hovenkamp,36 gives the authoritative answer and We quote: 

 

xxx  xxx  xxx

 

The rationale for predatory pricing is the sustaining of losses today that will give a firm monopoly profits in the future.  The monopoly profits will never materialize, however, if the market is flooded with new entrants as soon as the successful predator attempts to raise its price.  Predatory pricing will be profitable only if the market contains significant barriers to new entry.

 

As afore-discussed, the 4% tariff differential and the inventory requirement are significant barriers which discourage new players to enter the market.  Considering these significant barriers established by R.A. No. 8180 and the lack of players with the comparable clout of Petron, Shell and Caltex, the temptation for a dominant player to engage in predatory pricing and succeed is a chilling reality.  Petitioners’ charge that this provision on predatory pricing is anti-competitive is not without reason. 

 

Respondents belittle these barriers with the allegation that new players have entered the market since deregulation.  A scrutiny of the list of the alleged new players will, however, reveal that not one belongs to the class and category of Petron, Shell and Caltex.  Indeed, there is no showing that any of these new players intends to install any refinery and effectively compete with these dominant oil companies.  In any event, it cannot be gainsaid that the new players could have been more in number and more impressive in might if the illegal entry barriers in R.A. No. 8180 were not erected. 

 

We come to the final point.  We now resolve the total effect of the untimely deregulation, the imposition of 4% tariff differential on imported crude oil and refined petroleum products, the requirement of inventory and the prohibition on predatory pricing on the constitutionality of R.A. No. 8180.  The question is whether these offending provisions can be individually struck down without invalidating the entire R.A. No. 8180.  The ruling case law is well stated by author Agpalo,37 viz.

 

xxx  xxx  xxx

 

The general rule is that where part of a statute is void as repugnant to the Constitution, while another part is valid, the valid portion, if separable from the invalid, may stand and be enforced.  The presence of a separability clause in a statute creates the presumption that the legislature intended separability, rather than complete nullity of the statute.  To justify this result, the valid portion must be so far independent of the invalid portion that it is fair to presume that the legislature would have enacted it by itself if it had supposed that it could not constitutionally enact the other.  Enough must remain to make a complete, intelligible and valid statute, which carries out the legislative intent.

 

The exception to the general rule is that when the parts of a statute are so mutually dependent and connected, as conditions, considerations, inducements, or compensations for each other, as to warrant a belief that the legislature intended them as a whole, the nullity of one part will vitiate the rest.  In making the parts of the statute dependent, conditional, or connected with one another, the legislature intended the statute to be carried out as a whole and would not have enacted it if one part is void, in which case if some parts are unconstitutional, all the other provisions thus dependent, conditional, or connected must fall with them.

 

R.A. No. 8180 contains a separability clause.  Section 23 provides that “if for any reason, any section or provision of this Act is declared unconstitutional or invalid, such parts not affected thereby shall remain in full force and effect.”  This separability clause notwithstanding, we hold that the offending provisions of R.A. No. 8180 so permeate its essence that the entire law has to be struck down.  The provisions on tariff differential, inventory and predatory pricing are among the principal props of R.A. No. 8180.  Congress could not have deregulated the downstream oil industry without these provisions.  Unfortunately, contrary to their intent, these provisions on tariff differential, inventory and predatory pricing inhibit fair competition, encourage monopolistic power and interfere with the free interaction of market forces.  R.A. No. 8180 needs provisions to vouchsafe free and fair competition.  The need for these vouchsafing provisions cannot be overstated.  Before deregulation, Petron, Shell and Caltex had no real competitors but did not have a free run of the market because government controls both the pricing and non-pricing aspects of the oil industry.  After deregulation, Petron, Shell and Caltex remain unthreatened by real competition yet are no longer subject to control by government with respect to their pricing and non-pricing decisions.  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. 

 

The fall-out effects of the defects of R.A. No. 8180 on our people have not escaped Congress.  A lot of our leading legislators have come out openly with bills seeking the repeal of these odious and offensive provisions in R.A. No. 8180.  In the Senate, Senator Freddie Webb has filed S.B. No. 2133 which is the result of the hearings conducted by the Senate Committee on Energy.  The hearings revealed that (1) there was a need to level the playing field for the new entrants in the downstream oil industry, and (2) there was no law punishing a person for selling petroleum products at unreasonable prices. 

 

Senator Alberto G. Romulo also filed S.B. No. 2209 abolishing the tariff differential beginning January 1, 1998.  He declared that the amendment “would mean that instead of just three [3] big oil companies there will be other major oil companies to provide more competitive prices for the market and the consuming public.”  Senator Heherson T. Alvarez, one of the principal proponents of R.A. No. 8180, also filed S.B. No. 2290 increasing the penalty for violation of its Section 9.  It is his opinion as expressed in the explanatory note of the bill that the present oil companies are engaged in cartelization despite R.A. No. 8180, viz.

 

xxx  xxx  xxx

 

Since the downstream oil industry was fully deregulated in February 1997, there have been eight (8) fuel price adjustments made by the three oil majors, namely:  Caltex Philippines, Inc.; Petron Corporation; and Pilipinas Shell Petroleum Corporation.  Very noticeable in the price adjustments made, however, is the uniformity in the pump prices of practically all petroleum products of the three oil companies.  This, despite the fact, that their selling rates should be determined by a combination of any of the following factors:  the prevailing peso-dollar exchange rate at the time payment is made for crude purchases, sources of crude, and inventory levels of both crude and refined petroleum products.  The abovestated factors should have resulted in different, rather than identical prices.

 

The fact that the three [3] oil companies’ petroleum products are uniformly priced suggests collusion, amounting to cartelization, among Caltex Philippines, Inc., Petron Corporation and Pilipinas Shell Petroleum Corporation to fix the prices of petroleum products in violation of paragraph (a), Section 9 of R.A. No. 8180.

 

To deter this pernicious practice and to assure that present and prospective players in the downstream oil industry conduct their business with conscience and propriety, cartel-like activities ought to be severely penalized.

 

Senator Francisco S. Tatad also filed S.B. No. 2307 providing for a uniform tariff rate on imported crude oil and refined petroleum products.  In the explanatory note of the bill, he declared in no uncertain terms that “the present set-up has raised serious public concern over the way the three oil companies have uniformly adjusted the prices of oil in the country, an indication of a possible existence of a cartel or a cartel-like situation within the downstream oil industry.  This situation is mostly attributed to the foregoing provision on tariff differential, which has effectively discouraged the entry of new players in the downstream oil industry.”

 

In the House of Representatives, the moves to rehabilitate R.A. No. 8180 are equally feverish.  Representative Leopoldo E. San Buenaventura has filed H.B. No. 9826 removing the tariff differential for imported crude oil and imported refined petroleum products.  In the explanatory note of the bill, Rep. Buenaventura explained: 

 

xxx  xxx  xxx

 

As we now experience, this difference in tariff rates between imported crude oil and imported refined petroleum products, unwittingly provided a built-in-advantage for the three existing oil refineries in the country and eliminating competition which is a must in a free enterprise economy.  Moreover, it created a disincentive for other players to engage even initially in the importation and distribution of refined petroleum products and ultimately in the putting up of refineries.  This tariff differential virtually created a monopoly of the downstream oil industry by the existing three oil companies as shown by their uniform and capricious pricing of their products since this law took effect, to the great disadvantage of the consuming public.

 

Thus, instead of achieving the desired effects of deregulation, that of free enterprise and a level playing field in the downstream oil industry, R.A. 8180 has created an environment conducive to cartelization, unfavorable, increased, unrealistic prices of petroleum products in the country by the three existing refineries.

 

Representative Marcial C. Punzalan, Jr., filed H.B. No. 9981 to prevent collusion among the present oil companies by strengthening the oversight function of the government, particularly its ability to subject to a review any adjustment in the prices of gasoline and other petroleum products.  In the explanatory note of the bill, Rep. Punzalan, Jr., said: 

 

xxx  xxx  xxx

 

To avoid this, the proposed bill seeks to strengthen the oversight function of government, particularly its ability to review the prices set for gasoline and other petroleum products.  It grants the Energy Regulatory Board [ERB] the authority to review prices of oil and other petroleum products, as may be petitioned by a person, group or any entity, and to subsequently compel any entity in the industry to submit any and all documents relevant to the imposition of new prices.  In cases where the Board determines that there exist collusion, economic conspiracy, unfair trade practice, profiteering and/or overpricing, it may take any step necessary to protect the public, including the readjustment of the prices of petroleum products.  Further, the Board may also impose the fine and penalty of imprisonment, as prescribed in Section 9 of R.A. 8180, on any person or entity from the oil industry who is found guilty of such prohibited acts.

 

By doing all of the above, the measure will effectively provide Filipino consumers with a venue where their grievances can be heard and immediately acted upon by government.  Thus, this bill stands to benefit the Filipino consumer by making the price-setting process more transparent and making it easier to prosecute those who perpetrate such prohibited acts as collusion, overpricing, economic conspiracy and unfair trade.

 

Representative Sergio A. F. Apostol filed H.B. No. 10039 to remedy an omission in R.A. No. 8180 where there is no agency in government that determines what is “reasonable” increase in the prices of oil products.  Representative Dante O. Tiñga, one of the principal sponsors of R.A. No. 8180, filed H.B. No. 10057 to strengthen its anti-trust provisions.  He elucidated in its explanatory note: 

 

xxx  xxx  xxx

 

The definition of predatory pricing, however, needs to be tightened up particularly with respect to the definitive benchmark price and the specific anti-competitive intent.  The definition in the bill at hand which was taken from the Areeda-Turner test in the United States on predatory pricing resolves the questions.  The definition reads, “Predatory pricing means selling or offering to sell any oil product at a price below the average variable cost for the purpose of destroying competition, eliminating a competitor or discouraging a competitor from entering the market.”

 

The appropriate actions which may be resorted to under the Rules of Court in conjunction with the oil deregulation law are adequate.  But to stress their availability and dynamism, it is a good move to incorporate all the remedies in the law itself.  Thus, the present bill formalizes the concept of government intervention and private suits to address the problem of antitrust violations.  Specifically, the government may file an action to prevent or restrain any act of cartelization or predatory pricing, and if it has suffered any loss or damage by reason of the antitrust violation it may recover damages.  Likewise, a private person or entity may sue to prevent or restrain any such violation which will result in damage to his business or property, and if he has already suffered damage he shall recover treble damages.  A class suit may also be allowed. 

 

To make the DOE Secretary more effective in the enforcement of the law, he shall be given additional powers to gather information and to require reports. 

 

   Representative Erasmo B. Damasing filed H.B. No. 7885 and has a more unforgiving view of R.A. No. 8180.  He wants it completely repealed.  He explained: 

 

xxx  xxx  xxx

 

Contrary to the projections at the time the bill on the Downstream Oil Industry Deregulation was discussed and debated upon in the plenary session prior to its approval into law, there aren’t any new players or investors in the oil industry.  Thus, resulting in practically a cartel or monopoly in the oil industry by the three [3] big oil companies, Caltex, Shell and Petron.  So much so, that with the deregulation now being partially implemented, the said oil companies have succeeded in increasing the prices of most of their petroleum products with little or no interference at all from the government.  In the month of August, there was an increase of Fifty centavos (50 ¢) per liter by subsidizing the same with the OPSF, this is only temporary as in March 1997, or a few months from now, there will be full deregulation [Phase II] whereby the increase in the prices of petroleum products will be fully absorbed by the consumers since OPSF will already be abolished by then.  Certainly, this would make the lives of our people, especially the unemployed ones, doubly difficult and unbearable.

 

The much-ballyhooed coming in of new players in the oil industry is quite remote considering that these prospective investors cannot fight the existing and well established oil companies in the country today, namely, Caltex, Shell and Petron.  Even if these new players will come in, they will still have no chance to compete with the said three [3] existing big oil companies considering that there is an imposition of oil tariff differential of 4% between importation of crude oil by the said oil refineries paying only 3% tariff rate for the said importation and 7% tariff rate to be paid by businessmen who have no oil refineries in the Philippines but will import finished petroleum/oil products which is being taxed with 7% tariff rates.

 

So, if only to help the many who are poor from further suffering as a result of unmitigated increase in oil products due to deregulation, it is a must that the Downstream Oil Industry Deregulation Act of 1996, or R.A. 8180 be repealed completely.

 

Various resolutions have also been filed in the Senate calling for an immediate and comprehensive review of R.A. No. 8180 to prevent the downpour of its ill effects on the people.  Thus, S.  Res.  No. 574 was filed by Senator Gloria M. Macapagal entitled Resolution “Directing the Committee on Energy to Inquire Into the Proper Implementation of the Deregulation of the Downstream Oil Industry and Oil Tax Restructuring As Mandated Under R.A. Nos.  8180 and 8184, in Order to Make the Necessary Corrections in the Apparent Misinterpretation of the Intent and Provision of the Laws and Curb the Rising Tide of Disenchantment Among the Filipino Consumers And Bring About the Real Intentions and Benefits of the Said Law.”  Senator Blas F. Ople filed S. Res. No. 664 entitled resolution “Directing the Committee on Energy to Conduct an Inquiry In Aid of Legislation to Review the Government’s Oil Deregulation Policy in Light of the Successive Increases in Transportation, Electricity and Power Rates, As Well As of Food and Other Prime Commodities and Recommend Appropriate Amendments to Protect the Consuming Public.”  Senator Ople observed:

 

xxx  xxx  xxx

 

WHEREAS, since the passage of R.A. No. 8180, the Energy Regulatory Board [ERB] has imposed successive increases in oil prices which has triggered increases in electricity and power rates, transportation fares, as well as in prices of food and other prime commodities to the detriment of our people, particularly the poor;

 

WHEREAS, the new players that were expected to compete with the oil cartel – Shell, Caltex and Petron – have not come in;

 

WHEREAS, it is imperative that a review of the oil deregulation policy be made to consider appropriate amendments to the existing law such as an extension of the transition phase before full deregulation in order to give the competitive market enough time to develop;

 

WHEREAS, the review can include the advisability of providing some incentives in order to attract the entry of new oil companies to effect a dynamic competitive market;

 

WHEREAS, it may also be necessary to defer the setting up of the institutional framework for full deregulation of the oil industry as mandated under Executive Order No. 377 issued by President Ramos last October 31, 1996.

 

Senator Alberto G. Romulo filed S. Res. No. 769 entitled resolution “Directing the Committees on Energy and Public Services in Aid of Legislation to Assess the Immediate Medium and Long Term Impact of Oil Deregulation on Oil Prices and the Economy.” Among the reasons for the resolution is the finding that “the requirement of a 40-day stock inventory effectively limits the entry of other oil firms in the market with the consequence that instead of going down oil prices will rise.”

 

Parallel resolutions have been filed in the House of Representatives.  Representative Dante O. Tiñga filed H. Res. No. 1311 “Directing the Committee on Energy to Conduct An Inquiry, In Aid of Legislation, Into the Pricing Policies and Decisions of the Oil Companies Since the Implementation of Full Deregulation Under the Oil Deregulation Act [R.A. No. 8180] for the Purpose of Determining in the Context of the Oversight Functions of Congress Whether the Conduct of the Oil Companies, Whether Singly or Collectively, Constitutes Cartelization Which Is A Prohibited Act Under R.A. No. 8180, and What Measures Should Be Taken to Help Ensure the Successful Implementation of the Law in Accordance With Its Letter and Spirit, Including Recommending Criminal Prosecution of the Officers Concerned of the Oil Companies If Warranted By The Evidence, And For Other Purposes.” Representatives Marcial C.  Punzalan, Jr., Dante O. Tiñga and Antonio E. Bengzon III filed H.R. No. 894 directing the House Committee on Energy to inquire into the proper implementation of the deregulation of the downstream oil industry.  House Resolution No. 1013 was also filed by Representatives Edcel C. Lagman, Enrique T. Garcia, Jr. and Joker P. Arroyo urging the President to immediately suspend the implementation of E.O. No. 392

 

In recent memory there is no law enacted by the legislature afflicted with so much constitutional deformities as R.A. No. 8180.  Yet, R.A. No. 8180 deals with oil, a commodity whose supply and price affect the ebb and flow of the lifeblood of the nation.  Its shortage of supply or a slight, upward spiral in its price shakes our economic foundation.  Studies show that the areas most impacted by the movement of oil are food manufacture, land transport, trade, electricity and water.38  At a time when our economy is in a dangerous downspin, the perpetuation of R.A. No. 8180 threatens to multiply the number of our people with bent backs and begging bowls.  R.A. No. 8180 with its anti-competition provisions cannot be allowed by this Court to stand even while Congress is working to remedy its defects. 

 

The Court, however, takes note of the plea of Petron, Shell and Caltex to lift our restraining order to enable them to adjust upward the price of petroleum and petroleum products in view of the plummeting value of the peso.  Their plea, however, will now have to be addressed to the Energy Regulatory Board as the effect of the declaration of unconstitutionality of R.A. No. 8180 is to revive the former laws it repealed.39  The length of our return to the regime of regulation depends on Congress which can fast track the writing of a new law on oil deregulation in accord with the Constitution. 

 

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, therefore, 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.  Striking down R.A. No. 8180 may cost losses in quantifiable terms to the oil oligopolists.  But the loss in tolerating the tampering of our Constitution is not quantifiable in pesos and centavos.  More worthy of protection than the supra-normal profits of private corporations is the sanctity of the fundamental principles of the Constitution.  Indeed when confronted by a law violating the Constitution, the Court has no option but to strike it down dead.  Lest it is missed, the Constitution is a covenant that grants and guarantees both the political and economic rights of the people.  The Constitution mandates this Court to be the guardian not only of the people’s political rights but their economic rights as well.  The protection of the economic rights of the poor and the powerless is of greater importance to them for they are concerned more with the esoterics of living and less with the esoterics of liberty.  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

 

SO ORDERED. 

 

Regalado, Davide, Jr., Romero, Bellosillo  and Vitug, JJ., concur. 

 

Mendoza, J., concurs in the result. 

 

Narvasa, CJ., is on leave. 
 
______________________________

 

1Downstream oil industry refers to the business of importing, exporting, re-exporting, shipping, transporting, processing, refining, storing, distributing, marketing and/or selling crude oil, gasoline, diesel, liquefied petroleum gas, kerosene and other petroleum and crude oil products.

 

2Paderanga & Paderanga, Jr., The Oil Industry in the Philippines, Philippine Economic Journal, No. 65, Vol.  27, pp.  27-98 [1988].

 

3Section 3, R.A. No. 6173.

 

4Section 7, R.A. No. 6173.

 

5P.D.  No. 334.

 

6Makasiar, G., Structural Response to the Energy Crisis: The Philippine Case.  Energy and Structural Change in the Asia Pacific Region: Papers and Proceedings of the 13th Pacific Trade and Development Conference.  Published by the Philippine Institute for Development Studies/Asian Development Bank and edited by Romeo M.  Bautista and Seiji Naya, pp.  311-312 (1984).

 

7P.D.  1956 as amended by E.O. 137.

 

8Section 3, E.O. No. 172.

 

9R.A. No. 7638.

 

10Section 5 (b), R.A. No. 7638.

 

11Section 5, R.A. No. 8180.

 

12Section 1, Article VIII, 1987 Constitution.

 

13Bondoc v. Pineda, 201 SCRA 792 (1991); Osmeña v. COMELEC, 199 SCRA 750 (1991).

 

14G.R.  No. 118295, May 2, 1997.

 

15E.g.  Garcia v. Executive Secretary, 211 SCRA 219 (1922); Osmeña v. COMELEC, 199 SCRA (1991); Basco v. Pagcor, 197 SCRA 52 (1991); Daza v. Singson, 180 SCRA 496 (1989), Araneta v. Dinglasan, 84 Phil. 368 (1949).

 

16163 SCRA 371 (1988).

 

17Section 26 (1) Article VI of the 1987 Constitution provides that “every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof.”

 

18Tobias v. Abalos, 239 SCRA 106 (1994); Philippine Judges Association v. Prado, 227 SCRA 703 (1993); Lidasan v. COMELEC, 21 SCRA 496 (1967).

 

19Tio v. Videogram Regulatory Board, 151 SCRA 208 (1987).

 

20Journal of the House of Representatives, December 13, 1995, p. 32.

 

2134 Phil. 136 citing Cincinnati, W. & Z. R.R. Co. vs. Clinton Country Commrs.  (1 Ohio St.  77)

 

22166 SCRA 533, 543-544.

 

23320 US 99.

 

24Philippine Political Law, 1995 ed., p. 99.

 

25Webster, New Third International Dictionary, 1993 ed., pp. 1780, 586 and 2218.

 

26See e.g., Balbuena v. Secretary of Education, 110 Phil. 150 used the standard “simplicity and dignity.”  People v. Rosenthal, 68 Phil. 328 (“public interest”); Calalang v. Williams, 70 Phil. 726 (“public welfare”); Rubi v. Provincial Board of Mindoro, 39 Phil. 669 (“interest of law and order”).

 

27See for example TSN of the Session of the Senate on November 14, 1995, p. 19, view of Senator Gloria M. Arroyo.

 

28Black’s Law Dictionary, 6th edition, p. 1007.

 

29Id., p. 266.

 

3054 Am Jur 2d 669.

 

31Art. 186.  Monopolies and combinations in restraint of trade.  The penalty of prision correccional in its minimum period or a fine ranging from 200 to 6,000 pesos, or both, shall be imposed upon:

 

1.         Any person who shall enter into any contract or agreement or shall take part in any conspiracy or combination in the form of a trust or otherwise, in restraint of trade or commerce to prevent by artificial means free competition in the market.

 

2.         Any person who shall monopolize any merchandise or object of trade or commerce, or shall combine with any other person or persons to monopolize said merchandise or object in order to alter the price thereof by spreading false rumors or making use of any other article to restrain free competition in the market;

 

3.         Any person who, being a manufacturer, producer, or processor of any merchandise or object of commerce or an importer of any merchandise or object of commerce from any foreign country, either as principal or agent, wholesaler or retailer, shall combine, conspire or agree in any manner with any person likewise engaged in the manufacture, production, processing, assembling or importation of such merchandise or object of commerce or with any other persons not so similarly engaged for the purpose of making transactions prejudicial to lawful commerce, or of increasing the market price in any part of the Philippines, or any such merchandise or object of commerce manufactured, produced, or processed, assembled in or imported into the Philippines, or of any article in the manufacture of which such manufactured, produced, processed, or imported merchandise or object of commerce is used.

 

If the offense mentioned in this article affects any food substance, motor fuel or lubricants, or other articles of prime necessity the penalty shall be that of prision mayor in its maximum and medium periods, it being sufficient for the imposition thereof that the initial steps have been taken toward carrying out the purposes of the combination.

 

x x x

 

Whenever any of the offenses described above is committed by a corporation or association, the president and each one of the directors or managers of said corporation or association, who shall have knowingly permitted or failed to prevent the commission of such offenses, shall be held liable as principals thereof.

 

32Art.  28.  Unfair competition in agricultural, commercial or industrial enterprises or in labor through the use of force, intimidation, deceit, machination or any other unjust, oppressive or highhanded method shall give rise to a right of action by the person who thereby suffers damage.

 

33Bernas, The Intent of the 1986 Constitution Writers (1995), p. 877; Philippine Long Distance Telephone Co.  v. National Telecommunications Commission, 190 SCRA 717 (1990); Northern Cement Corporation v. Intermediate Appellate Court, 158 SCRA 408 (1988); Philippine Ports Authority v. Mendoza, 138 SCRA 496 (1985); Anglo-Fil Trading Corporation v. Lazaro, 124 SCRA 494 (1983).

 

34Record of the Constitutional Commission, Volume III, p. 258.

 

35Gellhorn, Anti Trust Law and Economics in a Nutshell, 1986 ed.  p. 45.

 

36Economics and Federal Anti-Trust Law, Hornbook Series, Student ed., 1985 ed., p. 181.

 

37Statutory Construction, 1986 ed., pp. 28-29.

 

38IBON Facts and Figures, Vol. 18, No. 7, p. 5, April 15, 1995.

 

39Cruz v. Youngberg, 56 Phil. 234 (1931).

 

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