Philippine Supreme Court Jurisprudence > Year 1999 > December 1999 Decisions > G.R. No. 132451 December 17, 1999 - ENRIQUE T. GARCIA v. RENATO C. CORONA, ET AL.:

On November 5, 1997, this Court in Tatad v. Secretary of the Department of Energy and Lagman, Et Al., v. Hon. Ruben Torres, Et Al., 1 declared Republic Act No. 8180, entitled "An Act Deregulating the Downstream Oil Industry and For Other Purposes", unconstitutional, and its implementing Executive Order No. 392 void.chanrobles law library

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:chanrob1es virtual 1aw library

SECTION 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:chanrob1es virtual 1aw library

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:chanrob1es virtual 1aw library

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 trade 2 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:chanroblesvirtuallawlibrary

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

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:chanrob1es virtual 1aw library

The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.

This is so because the Government believes that deregulation will eventually prevent monopoly. The simplest form of monopoly exists when there is only one seller or producer of a product or service for which there are no substitutes. In its more complex form, monopoly is defined as the joint acquisition or maintenance by members of a conspiracy, formed for that purpose, of the power to control and dominate trade and commerce in a commodity to such an extent that they are able, as a group, to exclude actual or potential competitors from the field, accompanied with the intention and purpose to exercise such power. 4

Where two or three or a few companies act in concert to control market prices and resultant profits, the monopoly is called an oligopoly or cartel. It is a combination in restraint of trade.chanroblesvirtual|awlibrary

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 1992 5 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."cralaw virtua1aw library

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:chanrob1es virtual 1aw library

Section 19, Article XII of our Constitution is anti-trust in history and in spirit. It espouses competition. The desirability of competition is the reason for the prohibition against restraint of trade, the reason for the interdiction of unfair competition, and the reason for regulation of unmitigated monopolies. Competition is thus the underlying principle of section 19, Article XII of our Constitution which cannot be violated by R.A. No. 8180. We subscribe to the observation of Prof. Gellhorn that the objective of anti-trust law is "to assure a competitive economy, based upon the belief that through competition producers will strive to satisfy consumer wants at the lowest price with the sacrifice of the fewest resources. Competition among producers allows consumers to bid for goods and services, and thus matches their desires with society’s opportunity costs." He adds with appropriateness that there is a reliance upon "the operation of the ‘market’ system (free enterprise) to decide what shall be produced, how resources shall be allocated in the production process, and to whom the various products will be distributed. The market system relies on the consumer to decide what and how much shall be produced, and on competition, among producers to determine who will manufacture it." 6

In his recital of the antecedent circumstances, petitioner repeats in abbreviated form the factual findings and conclusions which led the Court to declare R.A. 8180 unconstitutional. The foreign oligopoly or cartel formed by respondents Shell, Caltex and Petron, their indulging in price-fixing and overpricing, their blockade tactics which effectively obstructed the entry of genuine competitors, the dangers posed by the oil cartel to national security and economic development, and other prevailing sentiments are stated as axiomatic truths. They are repeated in capsulized context as the current background facts of the present petition.

The empirical existence of this deplorable situation was precisely the reason why Congress enacted the oil deregulation law. The evils arising from conspiratorial acts of monopoly are recognized as clear and present. But the enumeration of the evils by our Tatad decision was not for the purpose of justifying continued government control, especially price control. The objective was, rather, the opposite. The evils were emphasized to show the need for free competition in a deregulated industry. And to be sure, the measures to address these evils are for Congress to determine, but they have to meet the test of constitutional validity.

The Court respects the legislative finding that deregulation is the policy answer to the problems. It bears stressing that R.A. 8180 was declared invalid not because deregulation is unconstitutional. The law was struck down because, as crafted, three key provisions plainly encouraged the continued existence if not the proliferation of the constitutionally proscribed evils of monopoly and restraint of trade.

In sharp contrast, the present petition lacks a factual foundation specifically highlighting the need to declare the challenged provision unconstitutional. There is a dearth of relevant, reliable, and substantial evidence to support petitioner’s theory that price control must continue even as Government is trying its best to get out of regulating the oil industry. The facts of the petition are, in the main, a general dissertation on the evils of monopoly.

Petitioner overlooks the fact that Congress enacted the deregulation law exactly because of the monopoly evils he mentions in his petition. Congress instituted the lifting of price controls in the belief that free and fair competition was the best remedy against monopoly power. In other words, petitioner’s facts are also the reasons why Congress lifted price controls and why the President accelerated the process. The facts adduced in favor of continued and indefinite price control are the same facts which supported what Congress believes is an exercise of wisdom and discretion when it chose the path of speedy deregulation and rejected Congressman Garcia’s economic theory.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

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 :chanrob1es virtual 1aw library

(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 . . . never inquire into the wisdom of the law."cralaw virtua1aw library

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:chanrob1es virtual 1aw library

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 . . . 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 P0.50 per liter."cralaw virtua1aw library

We are not impressed by petitioner Garcia’s submission. Petitioner has no basis in condemning as unconstitutional per se the date fixed by Congress for the beginning of the full deregulation of the downstream oil industry. Our Decision merely faulted the Executive for factoring the depletion of OPSF in advancing the date of full deregulation to February 1997. Nonetheless, the error of the Executive is now a non-issue for the full deregulation set by Congress itself at the end of March 1997 has already come to pass. March 1997 is not an arbitrary date. By that date, the transition period has ended and it was expected that the people would have adjusted to the role of market forces in shaping the prices of petroleum and its products. The choice of March 1997 as the date of full deregulation is a judgment of Congress and its judgment call cannot be impugned by this Court. 8

Reduced to its basic arguments, it can be seen that the challenge in this petition is not against the legality of deregulation. Petitioner does not expressly challenge deregulation. The issue, quite simply, is the timeliness or the wisdom of the date when full deregulation should be effective.

In this regard, what constitutes reasonable time is not for judicial determination. Reasonable time involves the appraisal of a great variety of relevant conditions, political, social and economic. They are not within the appropriate range of evidence in a court of justice. It would be an extravagant extension of judicial authority to assert judicial notice as the basis for the determination. 9

We repeat that what petitioner decries as unsuccessful is not a final result. It is only a beginning. The Court is not inclined to stifle deregulation as enacted by Congress from its very start. We leave alone the program of deregulation at this stage. Reasonable time will prove the wisdom or folly of the deregulation program for which Congress and not the Court is accountable.

Petitioner argues further that the public interest requires price controls while the oligopoly exists, for that is the only way the public can be protected from monopoly or oligopoly pricing. But is indefinite price control the only feasible and legal way to enforce the constitutional mandate against oligopolies?chanrobles virtual lawlibrary

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, Quisumbing, Purisima, Pardo, Buena and De Leon, Jr., JJ., concur.

Davide, Jr., C.J., concurs in the result. I also join Mr. Justice Panganiban in his separate opinion.

Vitug, J., concurs in the result.

Gonzaga-Reyes, J., took no part; spouse with counsel for intervenors.



PANGANIBAN, J.:

In essence, deregulation shifts the burden of price control from the government to the "market forces" in order (1) to eliminate government intervention that may "do more harm than good" 1 and (2) to achieve a truly competitive market of fair prices. 2 It is also aimed at removing government abuse and corruption in price-setting. At bottom, deregulation is supposed to provide the best goods and services at the cheapest prices.

The policy, however, is not an infallible cure to abuse, for the evil sought to be avoided may well pass on to the market players, particularly when they combine to restrain trade or engage in unfair competition. In the words of Prof. Romulo L. Neri of the Asian Institute of Management," [t]he market is motivated by price and profits (and sadly, not by moral values [or public interest]). The market does not automatically supply those who need (no matter how badly they need it) but only those who have the money to buy." 3

The buzz words of the third millennium are "deregulation," "globalization" and "liberalization." Territorial frontiers are virtually erased by these schemes, as goods and services are exchanged across borders unhampered by traditional tariffs, taxes, currency controls, quantitative restrictions and other protective barriers. Thus, states and governments tend to surrender some of their authorities and powers to the "market" and to the renewed energy of laissez faire, such that the threats to civil liberties and human rights, including economic rights, may shift from government abuses to the more bedeviling market forces that transcend boundaries and sovereignties. In developing countries more than in developed ones, such threats are real and ever present.

Judicial Review to Check Abuses

This is where the power of judicial review comes in — to examine the legal effects of these new economic paradigms and, in the present controversy, to check whether the present Oil Deregulation Law (RA 8479) restrains rather than promotes free trade, in contravention of the Constitution. True, the President and Congress, not this Court, have the power and the prerogative to determine whether to adopt such market policies and, if so, under what conditions and circumstances. However, all such policies and their ramifications must conform to the Constitution. Otherwise, this Court has the duty to strike them down, not because they are unwise or inconvenient, but because they are constitutionally impermissible.

Doctrinally, policies and acts of the political departments of government may be voided by this Court on either of two grounds — infringement of the Constitution or grave abuse of discretion. 4 An infringement may be proven by demonstrating that the words of the law directly contradict a provision of the fundamental law, or by presenting proof that the law authorizes or enables the respondents to violate the Constitution.

Petitioner Garcia’s Thesis on Unconstitutionality Concerns Policy

Having set down the doctrinal legal parameters, let me now discuss the petitioner’s thesis. Petitioner Enrique T. Garcia anchors his position on the alleged unconstitutionality of Section 19 of RA 8479, 5 which sets the full deregulation of the oil industry five months from the effectivity of the law, on the argument that said provision directly violates Section 19, Article XII of the Constitution, which reads as follows:chanrobles law library : red

"SECTION 19. The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed."cralaw virtua1aw library

He maintains that once Section 19 of RA 8479 is struck down, the government will be able to fix and lower petroleum prices indefinitely while awaiting the advent of "real" competition in the market.

Petitioner contends that the three largest oil companies (the "Big Three") comprise an oligopoly of the downstream oil industry. Oligopolies, he claims, "negate free market competition and fair prices." He submits that "regulation through price control . . . is patently required by the public interest [and] the failure to regulate the oligopoly through price control is patently inimical to the national interest and patently negates, circumvents and contravenes Section 19, Article XII of the Constitution."cralaw virtua1aw library

In Tatad v. Secretary of the Department of Energy, 6 this Court defined a monopoly and a combination in restraint of trade as follows:jgc:chanrobles.com.ph

"A monopoly is a privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right or power to carry on a particular business or trade, manufacture a particular article, or control the sale or the whole supply of a particular commodity. It is a form of market structure in which one or only a few firms dominate the total sales of a product or service. On the other hand, a combination in restraint of trade is an agreement or understanding between two or more persons, in the form of a contract, trust, pool, holding company, or other form of association, for the purpose of unduly restricting competition, monopolizing trade and commerce in a certain commodity, controlling its production, distribution and price, or otherwise interfering with freedom of trade without statutory authority. Combination in restraint of trade refers to the means, while monopoly refers to the end."cralaw virtua1aw library

In that case, RA 8180, the predecessor of RA 8479, was struck down by this Court for being contrary to Section 19, Article XII of the Constitution. We took this action because we found that its provisions on (1) tariff differential, (2) minimum inventory and (3) predatory pricing "inhibit fair competition, encourage monopolistic power and interfere with the free interaction of market forces." We concluded, "The aftermath of R.A. No. 8180 is a deregulated market where competition can be corrupted and where market forces can be manipulated by oligopolies."cralaw virtua1aw library

In my Concurring Opinion in Tatad, I labeled RA 8180 as "a pseudo deregulation law which in reality restrains free trade and perpetuates a cartel, an oligopoly" because of the aforecited three provisions, and because petitioners therein demonstrated to the Court "that the Big Three oil companies were producing and processing almost identical products which they were selling to the general public at identical prices. When one company adjusted its prices upwards or downwards, the other two followed suit at the same time and by the same amount." 7

In his present Petition, petitioner persistently alleges that" [i]t is self-evident truth that public interest requires the prevention of monopolistic/oligopolistic pricing . . .," and that such "monopolistic/oligopolistic pricing may be prevented only through price control during the regime of monopoly/oligopoly or through a truly competitive market under a regime of fair prices." In support of his allegations, he cites "self-evident truths [which] have . . . been officially recognized and implemented during more than 20 years of price control before the passage of the two oil deregulation laws" and which "have also been recognized and upheld by no less than the Supreme Court En Banc in the Tatad and Lagman cases . . . ." He contends that "the Big 3 remain as strong and dominant as ever."cralaw virtua1aw library

In other words, petitioner believes that there is no valid reason to lift price control at this time when allegedly there still exists an oligopoly in the industry. He proposes instead that government control should stand for an indefinite period until the new players are able to capture a substantial part of the market.

Unfortunately, however, the foregoing thematic statements and economic theory of Petitioner Garcia are policy in nature and are arguments supporting the wisdom of interim government price control. Indeed, "self-evident truths," economic theories, deeply-held beliefs, speculative assumptions and generalizations may be the bases of legislative and executive actions, but they cannot be substitutes for evidence and legal arguments in a judicial proceeding. Considered judgment calls of the legislative and the executive departments are the issues of whether the country should adopt the policy of complete or partial deregulation, and when such policy should take effect and over what products or services. These issues come within judicial determination only when there is clear and substantial proof that said policy and its concomitant variations are violative of the Constitution or are made by those agencies in grave abuse of their discretion.chanrobles law library

The Legal Issue Is Whether Petitioner

Has Submitted Sufficient Proof That the

Big Three Have Violated the Constitution

To be more specific, the pivotal issue before this Court is not whether it is wiser and more beneficial to empower the government to fix fuel prices; rather, it is whether petitioner has submitted enough factual bases to justify the legal conclusion that the Big Three — Petron, Shell and Caltex — have combined themselves "in restraint of trade or [to cause] unfair competition," to such an extent as to legally justify a striking down of Section 19 of RA 8479. The task of proving this issue is not easy; in fact, it is formidable and daunting. This is because laws are prima facie presumed constitutional and, unless clearly shown to be infirm, they will always be upheld. 8 So, too, regularity in the performance of official functions is the postulate, and any allegation of grave abuse or irregularity must be proven cogently.

Deregulation per se Is

Not Constitutionally Infirm

A close perusal of the assailed Section 19 of RA 8479 and Section 19 of Article XII of the Constitution does not readily reveal their irreconcilability. Indeed, even petitioner admits that the deregulation policy per se is not contrary to the Constitution. Neither could it be successfully argued that the implementation of such policy within the five-month phase-in period is per se anathema to our fundamental law. It is his imperative task therefore to adduce before the Court factual and legal bases to demonstrate clearly and cogently the unconstitutionality of the acts of Congress and the President in adopting and implementing full deregulation of petroleum prices at this time.

In this context, I have pored over the records of this case and searched long and wide for such factual and legal bases but, other than presumptions and generalizations that are unsupported by hard evidence, I could not find any. Petitioner fails to substantiate his allegations that the three oil giants have engaged, directly or indirectly, in an unholy alliance to fix prices and restrain trade.

True, retail prices of petroleum products have been increased, to the consternation of the public, but petitioner has not shown by specific fact or clear proof how the questioned provision of RA 8479 has been used to transgress the Constitution. He has not demonstrated that the Big Three arbitrarily dictate and corrupt the price of oil in a manner violative of the Constitution.

Petitioner merely resurrects and relies heavily on the arguments, the statistics and the proofs he submitted two years ago in the first oil deregulation case, Tatad v. Secretary of the Department of Energy. Needless to state, those reasons were taken into consideration in said case, and they indeed helped show the unconstitutionality of RA 8180. But exactly the same old grounds cannot continue to support petitioner’s present allegation that the major oil companies — Petron, Shell and Caltex — persist to this date in their oligopolistic practices, as a consequence of the current Oil Deregulation Law and in violation of the Constitution. In brief, the legal cause and effect relationship has not been amply shown.

Petitioner Has Not Proven

Arbitrariness or Despotism

Petitioner harps at the five-month period of transition from price control to full deregulation provided under Section 19 of RA 8479. He claims that such short period is not enough to ensure a "truly competitive market" in the supposed oligopoly of the oil industry. Again, his statement is not backed up by evidentiary basis. He offers no substantial proof that Congress, in deciding to lift price controls five months from the effectivity of RA 8475, gravely abused its discretion. To repeat, it is not within the province of the judiciary to determine whether five months is indeed short and, for that matter, what length of time is adequate. That is a matter of legislation addressed to the discretion of our policy makers.

It is basic to our form of government that the Court cannot inquire into the wisdom or expediency of the acts of the executive or the legislative department, unless there is a clear showing of constitutional infirmity or grave abuse of discretion amounting to lack or excess of jurisdiction. 9 "By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. Mere abuse of discretion is not enough. It must be grave abuse of discretion, as when the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law." 10 These jurisprudential elements of arbitrariness, despotism, passion and hostility have not been shown to exist under the present circumstances.chanroblesvirtualawlibrary

Market Share of New Players

Has Increased Under RA 8479

Historically, deregulation as a policy in the downstream oil industry was begun in 1996 when new players started to set up and operate their businesses in the country. That was practically a full three years of operations, the last two of which saw no significant barriers in terms of tariff differential, minimum inventory or predatory pricing.

Obviously, the conditions prevailing when the Court struck down RA 8180 two years ago have not been proven to be prevalent at present. In 1996, the new players had a market share of barely one percent. 11 The new players have since expanded or increased in number (46 as of June 30, 1999), and they now have about nine percent share of the market. 12 Significantly, these new players have intervened in this case in defense of the law. These are the little Davids who claim that with RA 8479 as their slingshot, they can, given enough time, fight and win against the three erstwhile unbeatable Goliaths. Indeed, they believe that the questioned provision has given them the impetus to compete and thereby eventually show the benefits of deregulation; namely, the best products at the cheapest prices.

With this factual backdrop and in the dire absence of contrary proof, it would be specious to conclude that under the aegis of Section 19 of RA 8479, the Big Three have restrained trade or unduly restrained competition.

Moreover, the three provisions in RA 8180 which were adjudged abhorrent to the fundamental principles of free enterprise are no longer found in RA 8479. The depletion of the Oil Price Stabilization Fund, the extraneous factor that was considered by the President in accelerating the implementation of full deregulation under RA 8180, was no longer taken into account in the present milieu. The Court’s reasons for declaring the unconstitutionality of RA 8180 are, therefore, not germane to the validity of RA 8479. The petitioner cannot rely on the same rationale for the purpose of successfully assailing RA 8479. Indeed, he admits that "the Tatad and Lagman cases . . . did not consider and adjudicate on the lifting of price control per se, under RA 8180, as an issue."cralaw virtua1aw library

Epilogue

In sum, I make no secret of my sympathy for petitioner’s frustration at the inability of our government to arrest the spiraling cost of fuel and energy. 13 I hear the cry of the poor that life has become more miserable day by day. I feel their anguish, pain and seeming hopelessness in securing their material needs.

However, the power to lower petroleum prices through the adoption or the rejection of viable economic policies or theories does not lie in the Court or its members. Furthermore, absent sufficient factual evidence and legal moorings, I cannot vote to declare a law or any provision thereof to be unconstitutional simply because, theoretically, such action may appear to be wise or beneficial or practical. Neither can I attribute grave abuse of discretion to another branch of government without an adequate showing of patent arbitrariness, whim or caprice. Should I do so, I myself will be gravely abusing my discretion, the very evil that petitioner attributes to the legislature.

WHEREFORE, I vote to DISMISS the Petition.chanrobles.com:cralaw:red

Endnotes:

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1. 281 SCRA 330 (1997).

2. CONSTITUTION, Article XII, Section 19.

3. Rollo, pp. 15-16.

4. American Tobacco Co. v. United States, 328 U.S. 781; 90 L. Ed. 1575.

5. Republic Act No. 7638.

6. supra., at 358; citing Gellhorn, Anti Trust Law and Economics is a Nutshell, 1986 ed., p. 45.

7. 22 SCRA 424, at 450-51 (1968); Citations omitted.

8. Tatad v. Secretary of the Department of Energy, 282 SCRA 337, 353 (1997).

9. Coleman v. Miller 307 U.S. 433; 59 S. Ct. 972; 83 L. Ed. 1385 (1939).

PANGANIBAN, J.:chanrob1es virtual 1aw library

1. See public respondent’s Memorandum, p. 19, citing Samuelson and Nordhaus, Economics, 1992 ed., p. 341.

2. � 2, RA 8479.

3. Neri, Economics and Public Policy, 1999 ed., p. 23. Parentheses in original but brackets supplied.

4. Tañada v. Angara, 272 SCRA 18, May 2, 1997; Tatad v. Secretary of the Department of Energy, infra; Santiago v. Guingona Jr., GR No. 134577, November 18, 1998.

5. "Sec. 19. Start of Full Deregulation. — Full deregulation of the [Downstream Oil] Industry shall start five (5) months following the effectivity of this Act: Provided, however, That when the public interest so requires, the President may accelerate the start of full deregulation upon the recommendation of the DOE and the Department of Finance (DOF) when the prices of crude oil and petroleum products in the world market are declining and the value of the peso in relation to the US dollar is stable, taking into account relevant trends and prospects . . ."cralaw virtua1aw library

6. 281 SCRA 330, 355; November 5, 1997; per Puno, J .

7. This quote is taken from a comment I made in Battles in the Supreme Court, 1998 ed., p. 121.

8. Lim v. Pacquing, 240 SCRA 649, January 27, 1995; Tano v. Socrates, 278 SCRA 154, 1997; Tan v. People, 290 SCRA 117, May 19, 1998.

9. Tañada v. Angara, supra; Santiago v. Guingona Jr., supra. See also Garcia v. Comelec, 227 SCRA 100, October 5, 1993; Tañada v. Cuenco, 103 Phil 1051, February 28, 1957; Magtajas v. Pryce Properties Corp., 223 SCRA 255, July 20, 1994.

10. Tañada v. Angara, supra, citing Zarate v. Olegario, 260 SCRA 1; October 7, 1996; San Sebastian College v. Court of Appeals, 197 SCRA 138, 144, May 15, 1991; Commissioner of Internal Revenue v. Court of Tax Appeals, 195 SCRA 444, 458, March 20, 1991; Simon v. Civil Service Commission, 215 SCRA 410, November 5, 1992; Bustamante v. Commissioner on Audit, 216 SCRA 134, 136, November 27, 1992.

11. Solicitor general’s Memorandum, p. 44.

12. Ibid.

13. During the Oral Argument on July 13, 1999, I compared petitioner to a Don Quixote bravely battling petroleum-powered windmills. If only for his gutsy Quixotic quest, I have, like many members of the Court, lent a sympathetic ear to petitioner, not only in this case but also in the earlier Tatad in which I wrote a Concurring Opinion to the Court’s Decision striking down RA 8180, the Oil Deregulation Law then.