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