Francisco S. Tatad vs. The Secretary of the Department of Energy and the Secretary of the Department of Finance, G.R. No. 124360

Nature of the Case

Petition to challenge the constitutionality of Republic Act 8180 deregulating the Philippine oil industry. This case addresses a range of issues, including, prohibition against monopolies, and the extent of judicial authority.

Summary

A group of Philippine legislators brought this case to challenge the constitutionality of Republic Act No. 8180, otherwise known as the Downstream Oil Industry Deregulation Act of 1996, specifically Sections 5(b), 6 and 9(b) of the Act.

The petitioners alleged that the Big Three oil companies – Petron, Shell and Caltex — 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 practically the same time, and by the same amount.  The aforementioned oil companies were able, among other things, to determine gas prices because Republic Act 8180, the Oil Deregulation Law, lifted government controls over downstream oil industry.

The Supreme Court found that RA 8180 enabled the three oil companies to effectively form a monopoly or a cartel in the oil industry.  Additionally, three specific provisions in the law (on tariff differential, stocking of inventories, and predatory pricing) tended to obstruct the entry or competitiveness of new players.  Noting the centrality of electricity in people’s lives, the Court cautioned that higher oil prices facilitated by RA 8180, “threatens to multiply the number of our people with bent backs and begging bowls.” Upon full consideration of the issues at stake in this case, the Court held that RA 8180 offended the constitutional prohibition against monopolies and combinations in restraint of trade,  specifically Article XII, Sec. 19, of the 1997 Constitution which mandates that “[t]he State shall regulate or prohibit monopolies when the public interest so requires.  No combinations in restraint of trade or unfair competition shall be allowed.”

Enforcement of the Decision and Outcomes

With respect to enforcement, the Court held that the offending provisions of the legislation so permeate its essence that the entire law had to struck down. Following the judgment, a motion for reconsideration of the decision was filed by the government but was dismissed by the Court for lack of merit. To counter the Tatad decision declaring RA 8180 unconstitutional, the Philippines passed the Republic Act No. 8479 (“RA 8479”) otherwise known as the Downstream Oil Industry Deregulation Act of 1998, on February 10, 1998. This new legislation omitted the offending sections of RA 8180. The constitutionality of this law was challenged as well but the claim was not successful at court where the judiciary demonstrated significant deference to the legislature stating 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.”

Significance of the Case

The Tatad decision is an example of socio-economic litigation which focuses on processes associated with privatization. (Malcolm Langford ed., Social Rights Jurisprudence, 2008, p. 19) This is particularly significant given current global trends regarding privatization. The case is considered a landmark judgment with respect to the Philippines’ nascent anti-trust scene.

The Tatad decision is noteworthy for its clear recognition of the role of the judiciary in protecting the political and economic rights of the people of the Philippines as demonstrated in its observations that the Court could not “shirk its duty of striking down a law that offends the Constitution,” even if such law was an economic decision of the legislature. However subsequent related decisions have demonstrated the impact the separation of powers doctrine can have on cases dealing with economic and social policies.

(Updated August 2015)

Groups Involved in the Case

Free Legal Assistance Group (FLAG)