Tatad vs. Secretary of The Department of Energy

Tatad vs.
Secretary of the Department of Energy
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 TAÑADA, FLAG HUMAN RIGHTS
FOUNDATION, INC., FREEDOM FROM DEBT COALITION (FDC), SANLAKAS, petitioners, vs. HON. RUBEN
TORRES in his capacity as the Executive Secretary, HON. FRANCISCO VIRAY, in his capacity as the
Secretary of Energy, CALTEX Philippines, Inc., PETRON Corporation and PILIPINAS SHELL Corporation,
respondents.
Constitutional Law; Statutes; Courts; 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.—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. 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.
Same; Same; Same; The 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.—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. In Kapatiran
ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, we stressed: “x x x 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.”
Same; Same; Same; Court holds 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.—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 provision 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 ruled 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.
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.
Same; Same; Same; Two accepted tests to determine whether or not there is a valid delegation of
legislative power.—“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.”
Same; Same; Same; Section 15 can hurdle both the completeness test and the sufficient standard test.—
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.
Same; Same; Same; Court holds 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.—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. 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.
Same; Same; Same; Republic Act No. 8180 needs provisions to vouchsafe free and fair competition.—
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
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Tatad vs. Secretary of the Department of Energy
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.
KAPUNAN, J., Separate Opinion
Constitutional Law; Statutes; Courts; The tariff differential between imported crude oil and refined
petroleum products defeats the purpose of the law and should thus be struck down.—Since the
prospective oil companies do not (as yet) have local refineries, they would have to import refined
petroleum products, on which a 7% tariff duty is imposed. On the other hand, the existing oil companies
already have domestic refineries and, therefore, only import crude oil which is taxed at a lower rate of
3%. Tariffs are part of the costs of production. Hence, this means that with the 4% tariff differential
(which becomes an added cost) the prospective players would have higher production costs compared
to the existing oil companies and it is precisely this factor which could seriously affect its decision to
enter the market. Viewed in this light, the tariff differential between imported crude oil and refined
petroleum products becomes an obstacle to the entry of new players in the Philippine oil market. It
defeats the purpose of the law and should thus be struck down.
PANGANIBAN, J., Concurring Opinion
Constitutional Law; Statutes; Courts; Court has the duty, not just the power, to determine whether a law
or a part thereof offends
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SUPREME COURT REPORTS ANNOTATED
the Constitution and, if so, to annul and set aside.—Under the Constitution, this Court has—in
appropriate cases—the DUTY, not just the power, to determine whether a law or a part thereof offends
the Constitution and, if so, to annul and set aside. Because a serious challenge has been hurled against
the validity of one such law, namely RA 8180—its criticality having been preliminary determined from
the petition, comments, reply and, most tellingly, the oral argument on September 30, 1997—this Court,
in the exercise of its mandated judicial discretion, issued the status quo order to prevent the continued
enforcement and implementation of a law that was prima facie found to be constitutionally infirm.
Indeed, after careful final deliberation, said law is now ruled to be constitutionally defective thereby
disabling respondent oil companies from exercising their erstwhile power, granted by such defective
statute, to determine prices by themselves.
Same; Same; Same; Court has the prerogative to uphold the Constitution and to strike down and annul a
law that contravenes the Charter.—Concededly, this Court has no power to pass upon the wisdom,
merits and propriety of the acts of its co-equal branches in government. However, it does have the
prerogative to uphold the Constitution and to strike down and annul a law that contravenes the Charter.
From such duty and prerogative, it shall never shirk or shy away.
MELO, J., Dissenting Opinion
Constitutional Law; Statutes; Courts; The submissions of petitioners require a review of issues that are in
the nature of political questions, hence, clearly beyond the ambit of judicial inquiry.—The instant
petitions do not raise a justiciable controversy as the issues raised therein pertain to the wisdom and
reasonableness of the provisions of the assailed law. The contentions made by petitioners, that the
“imposition of different tariff rates on imported crude oil and imported refined petroleum products will
not foster a truly competitive market, nor will it level the playing fields” and that said imposition “does
not deregulate the downstream oil industry, instead, it controls the oil industry, contrary to the avowed
policy of the law,” are clearly policy matters which are within the province of the political departments
of the government. These submissions require a review of issues that are in the nature of political
questions, hence, clearly beyond the ambit of judicial inquiry.
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Same; Same; Same; Political questions are concerned with issues dependent upon the wisdom, not the
legality, of a particular measure.—A political question refers to a question of policy or to issues which,
under the Constitution, are to be decided by the people in their sovereign capacity, or in regard to which
full discretionary authority has been delegated to the legislative or executive branch of the government.
Generally, political questions are concerned with issues dependent upon the wisdom, not the legality, of
a particular measure.
Same; Same; Same; Actions; The existence of a constitutional issue in a case does not per se confer or
clothe a legislator with locus standi to bring suit.—The petitioners do not have the necessary locus
standi to file the instant consolidated petitions. Petitioners Lagman, Arroyo, Garcia, Tanada, and Tatad
assail the constitutionality of the above-stated laws through the instant consolidated petitions in their
capacity as members of Congress, and as taxpayers and concerned citizens. However, the existence of a
constitutional issue in a case does not per se confer or clothe a legislator with locus standi to bring suit.
In Phil. Constitution Association (PHILCONSA) v. Enriquez (235 SCRA 506 [1994]), we held that members
of Congress may properly challenge the validity of an official act of any department of the government
only upon showing that the assailed official act affects or impairs their rights and prerogatives as
legislators. In Kilosbayan, Inc., et al. vs. Morato, et al. (246 SCRA 540 [1995]), this Court further clarified
that “if the complaint is not grounded on the impairment of the power of Congress, legislators do not
have standing to question the validity of any law or official action.”
Same; Same; Same; Same; Republic Act No. 8180 clearly does not violate or impair prerogatives, powers,
and rights of Congress, or the individual members thereof.—Republic Act No. 8180 clearly does not
violate or impair prerogatives, powers, and rights of Congress, or the individual members thereof,
considering that the assailed official act is the very act of Congress itself authorizing the full deregulation
of the downstream oil industry.
Same; Same; Same; Same; Neither can petitioners sue as taxpayers or concerned citizens.—Neither can
petitioners sue as taxpayers or concerned citizens. A condition sine qua non for the institution of a
taxpayer’s suit is an allegation that the assailed action is an unconstitutional exercise of the spending
powers of Congress or that it constitutes an illegal disbursement of public funds. The instant
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consolidated petitions do not allege that the assailed provisions of the law amount to an illegal
disbursement of public money. Hence, petitioners cannot, even as taxpayers or concerned citizens,
invoke this Court’s power of judicial review.
Same; Same; Same; Same; The interest of the person assailing the constitutionality of a statute must be
direct and personal.—Further, petitioners, including Flag, FDC, and Sanlakas, can not be deemed proper
parties for lack of a particularized interest or elemental substantial injury necessary to confer on them
locus standi. The interest of the person assailing the constitutionality of a statute must be direct and
personal. He must be able to show, not only that the law is invalid, but also that he has sustained or is in
immediate danger of sustaining some direct injury as a result of its enforcement, and not merely that he
suffers thereby in some indefinite way. It must appear that the person complaining has been or is about
to be denied some right or privilege to which he is lawfully entitled or that he is about to be subjected to
some burdens or penalties by reason of the statute complained of. Petitioners have not established such
kind of interest.
Same; Same; Section 5(b) of Republic Act No. 8180 is not violative of the “one title-one subject” rule
under Section 26(1), Article VI of the Constitution.—Section 5(b) of Republic Act No. 8180 is not violative
of the “one title-one subject” rule under Section 26(1), Article VI of the Constitution. It is not required
that a provision of law be expressed in the title thereof as long as the provision in question is embraced
within the subject expressed in the title of the law. The “title of a bill does not have to be a catalogue of
its contents and will suffice if the matters embodied in the text are relevant to each other and may be
inferred from the title.” (Association of Small Landowners in the Phils., Inc. vs. Sec. of Agrarian Reform,
175 SCRA 343 [1989]) An “act 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 object.”
Same; Same; Same; The conference committee can even include an amendment in the nature of a
substitute so long as such amendment is germane to the subject of the bill before it.—As regards the
power of the Bicameral Conference Committee to include in its
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report an entirely new provision that is neither found in the House bill or Senate bill, this Court already
upheld such power in Tolentino vs. Sec. of Finance (235 SCRA 630 [1994]), where we ruled that the
conference committee can even include an amendment in the nature of a substitute so long as such
amendment is germane to the subject of the bill before it.
FRANCISCO, J., Dissenting Opinion
Constitutional Law; Statutes; Courts; Congress is not required to employ in the title of an enactment,
language of such precision as to mirror, fully index or catalogue all the contents and the minute details
therein.—The interpretation of “one subject-one title” rule, however, is never intended to impede or
stifle legislation. The requirement is to be given a practical rather than a technical construction and it
would be sufficient compliance if the title expresses the general subject and all the provisions of the
enactment are germane and material to the general subject. Congress is not required to employ in the
title of an enactment, language of such precision as to mirror, fully index or catalogue all the contents
and the minute details therein. All that is required is that the title should not cover legislation
incongruous in itself, and which by no fair intendment can be considered as having a necessary or
proper connection.
Same; Same; Same; If a particular statute is within the constitutional power of the legislature to enact, it
should be sustained whether the courts agree or not in the wisdom of its enactment.—Perhaps it bears
reiterating that the question of validity of every statute is first determined by the legislative department
of the government, and the courts will resolve every presumption in favor of its validity. The courts will
assume that the validity of the statute was fully considered by the legislature when adopted. The
wisdom or advisability of a particular statute is not a question for the courts to determine. If a particular
statute is within the constitutional power of the legislature to enact, it should be sustained whether the
courts agree or not in the wisdom of its enactment. This Court continues to recognize that in the
determination of actual cases and controversies, it must reflect the wisdom and justice of the people as
expressed through their representatives in the executive and legislative branches of government. Thus,
the presumption is always in favor of constitutionality for it is likewise always presumed that in the
enactment of a law or the adoption of a policy it is the people who speak through their representatives.
This principle is one of
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caution and circumspection in the exercise of the grave and delicate function of judicial review.
PETITIONS to review the constitutionality of R.A. 8180.
The facts are stated in the opinion of the Court.
Sanidad, Abaya, Cortez, Te, Madrid, Viterbo & Tan Law Firm for petitioners.
Alfonso M. Cruz Law Offices for Enrique Garcia.
Brillantes, Navarro, Jumamil, Arcilla, Escolin and Martinez Law Office for petitioner in G.R. 104360.
Angara, Abello, Concepcion, Regala & Cruz for Caltex Philippines, Inc.
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—Petrophil. PNOC
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 concessionaires under the provisions of R.A. No. 387, as
amended x x x;
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 x x x 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
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7 P.D. 1956 as amended by E.O. 137.
8 Section 3, E.O. No. 172.
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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
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9 R.A. No. 7638.
10 Section 5(b), R.A. No. 7638.
11 Section 5, R.A. No. 8180.
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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
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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:
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E.O. No. 372 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, im-
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plement 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 P26.20 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
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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 x x x
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
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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 v. Angara:14
“x x x
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
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12 Section 1, Article VIII, 1987 Constitution.
13 Bondoc v. Pineda, 201 SCRA 792 (1991); Osmeña v. COMELEC, 199 SCRA 750 (1991).
14 G.R. No. 118295, May 2, 1997.
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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 sideglance 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 constitutionality
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. v. Tan,16 we stressed:
“x x x
Objections to taxpayers’ suit for lack of sufficient personality, standing or interest are, however, in the
main procedural matters.
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15 Garcia v. Executive Secretary, 211 SCRA 219 (1992); Osmeña v. COMELEC, 199 SCRA 750 (1991);
Basco v. Pagcor, 197 SCRA 52 (1991); Daza v. Singson, 180 SCRA 496 (1989); Araneta v. Dinglasan, 84
Phil. 368 (1949).
16 163 SCRA 371 (1988).
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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 RA 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
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17 Section 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.”
18 Tobias v. Abalos, 239 SCRA 106 (1994); Philippine Judges Association v. Prado, 227 SCRA 703 (1993);
Lidasan v. COMELEC, 21 SCRA 496 (1967).
19 Tio v. Videogram Regulatory Board, 151 SCRA 208 (1987).
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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
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20 Journal of the House of Representatives, December 13, 1995, p. 32.
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Utility Commissioners,21 this Court thru, 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
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21 34 Phil. 136 citing Cincinnati, W. & Z. R.R. Co. vs. Clinton Country Commrs. (1 Ohio St. 77).
22 166 SCRA 533, 543-544.
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legislative powers. Citing Hirabayashi v. 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
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23 320 US 99.
24 Philippine Political Law, 1995 ed., p. 99.
25 Webster, New Third International Dictionary, 1993 ed., pp. 1780, 586 and 2218.
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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 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
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26 See 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”).
27 See for example TSN of the Session of the Senate on November 14, 1995, p. 19, view of Senator
Gloria M. Arroyo.
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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:
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(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 com-petitors.”
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
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28 Black’s Law Dictionary, 6th edition, p. 1007.
29 Id., p. 266.
30 54 Am Jur 2d 669.
31 Art. 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
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Article 28 of the New Civil Code makes any person who shall engage in unfair competition liable for
damages.32
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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.
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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.
32 Art. 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 high-handed
method shall give rise to a right of action by the person who thereby suffers damage.
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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 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
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33 Bernas, 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).
34 Record of the Constitutional Commission, Volume III, p. 258.
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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. 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.”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
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35 Gellhorn, Anti Trust Law and Economics in a Nutshell, 1986 ed., p. 45.
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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
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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 “x x x 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:
“x x x
“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 aforediscussed, 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
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36 Economics and Federal Anti-Trust Law, Hornbook Series, Student ed., 1985 ed., p. 181.
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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.:
“x x x
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 constitutionaly enact the other. Enough must remain to make a
complete, intelligible and valid statute, which carries out the legislative intent. x x x
The exception to the general rule is that when the parts of a statute are so mutually dependent and
connected, as conditions,
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37 Statutory Construction, 1986 ed., pp. 28-29.
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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
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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 “x x x
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.:
“x x x
“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
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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 “x x x 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:
“x x x
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.”
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Representative Marcial C. Punzalan, Jr., filed H.B. No. 9981to prevent collusion among the present oil
companies bystrengthening the oversight function of the government, particularly its ability to subject
to a review any adjustment inthe prices of gasoline and other petroleum products. In theexplanatory
note of the bill, Rep. Punzalan, Jr., said:
“x x x
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. Tinga, 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:
“x x x
The definition of predatory pricing, however, needs to be tightened up particularly with respect to the
definitive benchmark price
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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:
“x x x
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
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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 P. 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:
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“x x x
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 x x x.”
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 MediumAnd Long Term Impact of Oil
Deregulation On Oil Prices AndThe Economy.” Among the reasons for the resolution is thefinding that
“the requirement of a 40-day stock inventory effectively limits the entry of other oil firms in the market
with theconsequence that instead of going down oil prices will rise.”
Parallel resolutions have been filed in the House of Representatives. Representative Dante O. Tinga 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.
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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. Tinga 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 regula-
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38 IBON Facts and Figures, Vol. 18, No. 7, p. 5, April 15, 1995.
39 Cruz v. Youngberg, 56 Phil. 234 (1931).
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tion depends on Congress which can fasttrack 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 therefor should be for Congress to write a new oil deregulation
law that conforms with the Constitution and not for this Court to shirk its duty of striking down a law
that offends the Constitution. 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 exoterics 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.
Narvasa (C.J.), On official leave.
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Melo, J., I dissent. Opinion follows.
Kapunan, J., See concurring opinion.
Mendoza, J., In the result.
Francisco, J., See dissenting opinion.
Panganiban, J., See concurring opinion.
SEPARATE OPINION
KAPUNAN, J.:
Lately, the Court has been perceived (albeit erroneously) to be an unwelcome interloper in affairs and
concerns best left to legislators and policy-makers. Admittedly, the wisdom of political and economic
decisions are outside the scrutiny of the Court. However, the political question doctrine is not some
mantra that will automatically cloak executive orders and laws (or provisions thereof) with legitimacy. It
is this Court’s bounden duty under Sec. 4(2), Art. VIII of the 1987 Constitution to decide all cases
involving the constitutionality of laws and under Sec. 1 of the same article, “to determine whether or
not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of
any branch or instrumentality of the Government.”
In the instant case, petitioners assail the constitutionality of certain provisions found in R.A. No. 8180,
otherwise known as the “Downstream Oil Industry Deregulation Act of 1996.” To avoid accusations of
undue interference with the workings of the two other branches of government, this discussion is
limited to the issue of whether or not the assailed provisions are germane to the law or serve the
purpose for which it was enacted.
The objective of the deregulation law is quite simple. As aptly enunciated in Sec. 2 thereof, it is to
“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.”
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The key, therefore, is free competition which is commonly defined as:
The act or action of seeking to gain what another is seeking to gain at the same time and usually under
or as if under fair or equitable rules and circumstances: a common struggle for the same object
especially among individuals of relatively equal standing . . . a market condition in which a large number
of independent buyers and sellers compete for identical commodity, deal freely with each other, and
retain the right of entry and exit from the market. (Webster’s Third International Dictionary.)
and in a landscape where our oil industry is dominated by only three major oil firms, this translates
primarily into the establishment of a free market conducive to the entry of new and several oil
companies in the business. Corollarily, it means the removal of any and all barriers that will hinder the
influx of prospective players. It is a truism in economics that if there are many players in the market,
healthy competition will ensue and in order to survive and profit the competitors will try to outdo each
other in terms of quality and price. The result: better quality products and competitive prices. In the
end, it will be the public that benefits (which is ultimately the most important goal of the law). Thus, it is
within this framework that we must determine the validity of the assailed provisions.
I
The 4% Tariff Differential
Sec. 5. Liberalization of Downstream Oil Industry and Tariff Treatment.—
x x x.
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
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shall be the same: Provided, further, That this provision may be amended only by an Act of Congress;
Respondents are one in asserting that the 4% tariff differential between imported crude oil and
imported refined petroleum products is intended to encourage the new entrants to put up their own
refineries in the country. The advantages of domestic refining cannot be discounted, but we must view
this intent in the proper perspective. The primary purpose of the deregulation law is to open up the
market and establish free competition. The priority of the deregulation law, therefore, is to encourage
new oil companies to come in first. Incentives to encourage the building of local refineries should be
provided after the new oil companies have entered the Philippine market and are actively participating
therein.
The threshold question therefore is, is the 4% tariff differential a barrier to the entry of new oil
companies in the Philippine market?
It is. Since the prospective oil companies do not (as yet) have local refineries, they would have to import
refined petroleum products, on which a 7% tariff duty is imposed. On the other hand, the existing oil
companies already have domestic refineries and, therefore, only import crude oil which is taxed at a
lower rate of 3%. Tariffs are part of the costs of production. Hence, this means that with the 4% tariff
differential (which becomes an added cost) the prospective players would have higher production costs
compared to the existing oil companies and it is precisely this factor which could seriously affect its
decision to enter the market.
Viewed in this light, the tariff differential between imported crude oil and refined petroleum products
becomes an obstacle to the entry of new players in the Philippine oil market. It defeats the purpose of
the law and should thus be struck down.
Public respondents contend that “. . . a higher tariff rate is not the overriding factor confronting a
prospective trader/importer but, rather, his ability to generate the desired internal rate of return (IRR)
and net present value (NPV). In other
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words, if said trader/importer, after some calculation, finds that he can match the price of locally refined
petroleum products and still earn the desired profit margin, despite a higher tariff rate, he will be
attracted to embark in such business. A tariff differential does not per se make the business of importing
refined petroleum product a losing proposition.”1
The problem with this rationale, however, is that it is highly speculative. The opposite may well hold
true. The point is to make the prospect of engaging in the oil business in the Philippines appealing, so
why create a barrier in the first place?
There is likewise no merit in the argument that the removal of the tariff differential will revive the 10%
(for crude oil) and 20% (for refined petroleum products) tariff rates that prevailed before the enactment
of R.A. No. 8180. What petitioners are assailing is the tariff differential. Phrased differently, why is the
tariff duty imposed on imported petroleum products not the same as that imposed on imported crude
oil? Declaring the tariff differential void is not equivalent to declaring the tariff itself void. The obvious
consequence thereof would be that imported refined petroleum products would now be taxed at the
same rate as imported crude oil which R.A. No. 8180 has specifically set at 3%. The old rates have
effectively been repealed by Sec. 24 of the same law.2
II
The Minimum Inventory Requirement and the Prohibition Against Predatory Pricing
SEC. 6. Security of Supply.—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
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1 Public respondents’ Comment, G.R. No. 127867, p. 39.
2 SEC. 24. Repealing Clause.—All laws, presidential decrees, executive orders, issuances, rules and
regulations or parts thereof, which are inconsistent with the provisions of this Act are hereby repealed
or modified accordingly.
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equivalent to ten percent (10%) of their respective annual sales volume or forty (40) days of supply,
whichever is lower.
x x x.
SEC. 9. Prohibited Acts.—To ensure fair competition and prevent cartels and monopolies in the
downstream oil industry, the following acts are hereby prohibited:
x x x.
b) Predatory pricing which means selling or offering to sell any product at a price unreasonably below
the industry average cost so as to attract customers to the detriment of competitors.
The same rationale holds true for the two other assailed provisions in the Oil Deregulation law. The
primordial purpose of the law, I reiterate, is to create a truly free and competitive market. To achieve
this goal, provisions that show the possibility, or even the merest hint, of deterring or impeding the
ingress of new blood in the market should be eliminated outright. I am confident that our lawmakers
can formulate other measures that would accomplish the same purpose (insure security and continuity
of petroleum crude products supply and prevent fly by night operators, in the case of the minimum
inventory requirement, for instance) but would not have on the downside the effect of seriously
hindering the entry of prospective traders in the market.
The overriding consideration, which is the public interest and public benefit, calls for the levelling of the
playing fields for the existing oil companies and the prospective new entrants. Only when there are
many players in the market will free competition reign and economic development begin.
Consequently, Section 6 and Section 9(b) of R.A. No. 8180 should similarly be struck down.
III
Conclusion
Respondent oil companies vehemently deny the “cartelization” of the oil industry. Their parallel
business behavior and uniform pricing are the result of competition, they say, in order to keep their
share of the market. This rationale fares
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well when oil prices are lowered, i.e., when one oil company rolls back its prices, the others follow suit
so as not to lose its market. But how come when one increases its prices the others likewise follow? Is
this competition at work?
Respondent oil companies repeatedly assert that due to the devaluation of the peso, they had to
increase the prices of their oil products, otherwise, they would lose, as they have allegedly been losing
specially with the issuance of a temporary restraining order by the Court. However, what we have on
record are only the self-serving lamentations of respondent oil companies. Not one has presented hard
data, independently verified, to attest to these losses. Mere allegations are not sufficient but must be
accompanied by supporting evidence. What probably is nearer the truth is that respondent oil
companies will not make as much profits as they have in the past if they are not allowed to increase the
prices of their products everytime the value of the peso slumps. But in the midst of worsening economic
difficulties and hardships suffered by the people, the very customers who have given them tremendous
profits throughout the years, is it fair and decent for said companies not to bear a bit of the burden by
foregoing a little of their profits?
PREMISES CONSIDERED, I vote that Section 5(b), Section 6 and Section 9(b) of R.A. No. 8180 be declared
unconstitutional.
CONCURRING OPINION
PANGANIBAN, J.:
I concur with the lucid and convincing ponencia of Mr. Justice Reynato S. Puno. I write to stress two
points:
1. The Issue Is Whether Oil Companies May Unilaterally Fix Prices, Not Whether This Court May Interfere
in Economic Questions
With the issuance of the status quo order on October 7, 1997 requiring the three respondent oil
companies—Petron, Shell and Caltex—“to cease and desist from increasing the
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prices of gasoline and other petroleum fuel products for a period of thirty (30) days,” the Court has been
accused of interfering in purely economic policy matters1 or, worse, of arrogating unto itself price-
regulatory powers.2 Let it be emphasized that we have no desire—nay, we have no power—to
intervene in, to change or to repeal the laws of economics, in the same manner that we cannot and will
not nullify or invalidate the laws of physics or chemistry.
The issue here is not whether the Supreme Court may fix the retail prices of petroleum products. Rather,
the issue is whether RA 8180, the law allowing the oil companies to unilaterally set, increase or decrease
their prices, is valid or constitutional.
Under the Constitution,3 this Court has—in appropriate cases—the DUTY, not just the power, to
determine whether a
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1 Consolidated Memorandum of Public Respondents, dated October 14, 1997.
2 Petron Corporation’s Motion to Lift Temporary Restraining Order, dated October 9, 1997, p. 16;
Pilipinas Shell Corporation’s Memorandum, dated October 15, 1997, pp. 36-37.
3 Sections 1 & 5 of Article VIII of the Constitution provides:
“Sec. 1. x x x
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack of or excess of jurisdiction on the part of any branch or
instrumentality of the Government.”
“Sec. 5. The Supreme Court shall have the following powers:
(1)Exercise original jurisdiction over x x x petitions for certiorari, prohibition, mandamus, quo warranto,
and habeas corpus.
(2)Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or Rules of Court may
provide, final judgments and orders of lower courts in:
(a)All cases in which the constitutionality or validity of any treaty, international or executive agree-
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law or a part thereof offends the Constitution and, if so, to annul and set it aside.4 Because a serious
challenge has been hurled against the validity of one such law, namely RA 8180—its critically having
been preliminary determined from the petition, comments, reply and, most tellingly, the oral argument
on September 30, 1997—this Court, in the exercise of its mandated judicial discretion, issued the status
quo order to prevent the continued enforcement and implementation of a law that was prima facie
found to be constitutionally infirm. Indeed, after careful final deliberation, said law is now ruled to be
constitutionally defective thereby disabling respondent oil companies from exercising their erstwhile
power, granted by such defective statute, to determine prices by themselves.
Concededly, this Court has no power to pass upon the wisdom, merits and propriety of the acts of its co-
equal branches in government. However, it does have the prerogative to uphold the Constitution and to
strike down and annul a law that contravenes the Charter.5 From such duty and prerogative, it shall
never shirk or shy away.
By annulling RA 8180, this Court is not making a policy statement against deregulation. Quite the
contrary, it is simply invalidating a pseudo deregulation law which in reality restrains free trade and
perpetuates a cartel, an oligopoly. The Court is merely upholding constitutional adherence to a truly
competitive economy that releases the creative energy of free enterprise. It leaves to Congress, as the
policy-setting agency of the government, the speedy crafting of a genuine, constitutionally justified oil
deregulation law.
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ment, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question.
x x x x x x x x x”
4 Osmeña vs. Comelec, 199 SCRA 750, July 30, 1991; Angara vs. Electoral Commission, 63 Phil. 139, July
15, 1936.
5 Tañada vs. Angara, G.R. No. 118295, May 2, 1997, p. 26.
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2. Everyone, Rich or Poor, Must Share in the Burdens of Economic Dislocation

Much has been said and will be said about the alleged negative effect of this Court’s holding on the oil
giants’ profit and loss statements. We are not unaware of the disruptive impact of the depreciating peso
on the retail prices of refined petroleum products. But such price-escalating consequence adversely
affects not merely these oil companies which occupy hallowed places among the most profitable
corporate behemoths in our country. In these critical times of widespread economic dislocations,
abetted by currency fluctuations not entirely of domestic origin, all sectors of society agonize and suffer.
Thus, everyone, rich or poor, must share in the burdens of such economic aberrations.
I can understand foreign investors who see these price adjustments as necessary consequences of the
country’s adherence to the free market, for that, in the first place, is the magnet for their presence here.
Understandably, their concern is limited to bottom lines and market share. But in all these mega
companies, there are also Filipino entrepreneurs and managers. I am sure there are patriots among
them who realize that, in times of economic turmoil, the poor and the underprivileged proportionately
suffer more than any other sector of society. There is a certain threshold of pain beyond which the
disadvantaged cannot endure. Indeed, it has been wisely said that “if the rich who are few will not help
the poor who are many, there will come a time when the few who are filled cannot escape the wrath of
the many who are hungry.” Kaya’t sa mga kababayan nating kapitalista at may kapangyarihan, nararapat
lamang na makiisa tayo sa mga walang palad at mahihirap sa mga araw ng pangangailangan. Huwag na
nating ipagdiinan ang kawalan ng tubo, o maging ang panandaliang pagkalugi. At sa mga mangangalakal
na ganid at walang puso: hirap na hirap na po ang ating mga kababayan. Makonsiyensya naman kayo!
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DISSENTING OPINION
MELO, J.:
With all due respect to my esteemed colleague, Mr. Justice Puno, who has, as usual, prepared a well-
written and comprehensive ponencia, I regret I cannot share the view that Republic Act No. 8180 should
be struck down as violative of the Constitution.
The law in question, Republic Act No. 8180, otherwise known as the Downstream Oil Deregulation Act of
1996, contains, inter alia, the following provisions which have become the subject of the present
controversy, to wit:
SEC. 5. Liberalization of Downstream Oil Industry and Tariff Treatment.—
xxx
(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 (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. x x x
SEC. 6. Security of Supply.—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.
xxx
SEC. 9. Prohibited Acts.—To ensure fair competition and prevent cartels and monopolies in the
downstream oil industry, the following acts are hereby prohibited:
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.
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xxx
SEC. 15. Implementation of Full Deregulation.—Pursuant to Section 5(e) of Republic Act No. 7638, the
DOE [Department of Energy] 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. x x x
In G.R. No. 124360, petitioners therein pray that the aforequoted Section 5(b) be declared null and void.
However, despite its pendency, President Ramos, pursuant to the above-cited Section 15 of the assailed
law, issued Executive Order No. 392 on 22 January 1997 declaring the full deregulation of the
downstream oil industry effective February 8, 1997. A few days after the implementation of said
Executive Order, the second consolidated petition was filed (G.R. No. 127867), seeking, inter alia, the
declaration of the unconstitutionality of Section 15 of the law on various grounds.
I submit that the instant consolidated petitions should be denied. In support of my view, I shall discuss
the arguments of the parties point by point.
1. The instant petitions do not raise a justiciable controversy as the issues raised therein pertain to the
wisdom and reasonableness of the provisions of the assailed law. The contentions made by petitioners,
that the “imposition of different tariff rates on imported crude oil and imported refined petroleum
products will not foster a truly competitive market, nor will it level the playing fields” and that said
imposition “does not deregulate the downstream oil industry, instead, it controls the oil industry,
contrary to the avowed policy of the law,” are clearly policy matters which are within the province of the
political departments of the government. These submissions require a review of issues that are in the
nature of political questions, hence, clearly beyond the ambit of judicial inquiry.
A political question refers to a question of policy or to issues which, under the Constitution, are to be
decided by the
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people in their sovereign capacity, or in regard to which full discretionary authority has been delegated
to the legislative or executive branch of the government. Generally, political questions are concerned
with issues dependent upon the wisdom, not the legality, of a particular measure (Tañada vs. Cuenco,
100 Phil. 101 [1957]).
Notwithstanding the expanded judicial power of this Court under Section 1, Article VIII of the
Constitution, an inquiry on the above-stated policy matters would delve on matters of wisdom which are
exclusively within the legislative powers of Congress.
2. The petitioners do not have the necessary locus standi to file the instant consolidated petitions.
Petitioners Lagman, Arroyo, Garcia, Tañada, and Tatad assail the constitutionality of the above-stated
laws through the instant consolidated petitions in their capacity as members of Congress, and as
taxpayers and concerned citizens. However, the existence of a constitutional issue in a case does not per
se confer or clothe a legislator with locus standi to bring suit. In Phil. Constitution Association
(PHILCONSA) v. Enriquez (235 SCRA 506 [1994]), we held that members of Congress may properly
challenge the validity of an official act of any department of the government only upon showing that the
assailed official act affects or impairs their rights and prerogatives as legislators. In Kilosbayan, Inc., et al.
vs. Morato, et al. (246 SCRA 540 [1995]), this Court further clarified that “if the complaint is not
grounded on the impairment of the power of Congress, legislators do not have standing to question the
validity of any law or official action.”
Republic Act No. 8180 clearly does not violate or impair prerogatives, powers, and rights of Congress, or
the individual members thereof, considering that the assailed official act is the very act of Congress itself
authorizing the full deregulation of the downstream oil industry.
Neither can petitioners sue as taxpayers or concerned citizens. A condition sine qua non for the
institution of a tax-payer’s suit is an allegation that the assailed action is an unconstitutional exercise of
the spending powers of Congress
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or that it constitutes an illegal disbursement of public funds. The instant consolidated petitions do not
allege that the assailed provisions of the law amount to an illegal disbursement of public money. Hence,
petitioners cannot, even as taxpayers or concerned citizens, invoke this Court’s power of judicial review.
Further, petitioners, including Flag, FDC, and Sanlakas, can not be deemed proper parties for lack of a
particularized interest or elemental substantial injury necessary to confer on them locus standi. The
interest of the person assailing the constitutionality of a statute must be direct and personal. He must
be able to show, not only that the law is invalid, but also that he has sustained or is in immediate danger
of sustaining some direct injury as a result of its enforcement, and not merely that he suffers thereby in
some indefinite way. It must appear that the person complaining has been or is about to be denied
some right or privilege to which he is lawfully entitled or that he is about to be subjected to some
burdens or penalties by reason of the statute complained of. Petitioners have not established such kind
of interest.
3. Section 5(b) of Republic Act No. 8180 is not violative of the “one title-one subject” rule under Section
26(1), Article VI of the Constitution. It is not required that a provision of law be expressed in the title
thereof as long as the provision in question is embraced within the subject expressed in the title of the
law. The “title of a bill does not have to be a catalogue of its contents and will suffice if the matters
embodied in the text are relevant to each other and may be inferred from the title.” (Association of
Small Landowners in the Phils., Inc. vs. Sec. of Agrarian Reform, 175 SCRA 343 [1989]) An “act 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 object.” (Sinco, Phil. Political Law, 11th ed., p. 225)
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384
The questioned tariff provision in Section 5(b) was provided as a means to implement the deregulation
of the downstream oil industry and hence, is germane to the purpose of the assailed law. The general
subject of Republic Act No. 8180, as expressed in its title, “An Act Deregulating the Downstream Oil
Industry, and for Other Purposes,” necessarily implies that the law provides for the means for such
deregulation. One such means is the imposition of the differential tariff rates which are provided to
encourage new investors as well as existing players to put up new refineries. The aforesaid provision is
thus germane to, and in furtherance of, the object of deregulation. The trend of jurisprudence, ever
since Sumulong vs. COMELEC (73 Phil. 288 [1941]), is to give the above-stated constitutional
requirement a liberal interpretation. Hence, there is indeed substantial compliance with said
requirement.
Petitioners claim that because the House version of the assailed law did not impose any tariff rates but
merely set the policy of “zero differential” and that the Senate version did not set or fix any tariff, the
tariff changes being imposed by the assailed law was never subject of any deliberations in both houses
nor the Bicameral Conference Committee. I believe that this argument is bereft of merit.
The report of the Bicameral Conference Committee, which was precisely formed to settle differences
between the two houses of Congress, was approved by members thereof only after a full deliberation
on the conflicting provisions of the Senate version and the House version of the assailed law. Moreover,
the joint explanatory statement of said Committee which was submitted to both houses, explicitly states
that “while sub-paragraph (b) is a modification, its thrust and style were patterned after the House’s
original sub-paragraph (b).” Thus, it cannot be denied that both houses were informed of the changes in
the aforestated provision of the assailed law. No legislator can validly state that he was not apprised of
the purposes, nature, and scope of the provisions of the law since the inclusion of the tariff differential
was clearly mentioned in the Bicameral Conference Committee’s explanatory note.
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As regards the power of the Bicameral Conference Committee to include in its report an entirely new
provision that is neither found in the House bill or Senate bill, this Court already upheld such power in
Tolentino vs. Sec. of Finance (235 SCRA 630 [1994]), where we ruled that the conference committee can
even include an amendment in the nature of a substitute so long as such amendment is germane to the
subject of the bill before it.
Lastly, in view of the “enrolled bill theory” pronounced by this Court as early as 1947 in the case of
Mabanag vs. Lopez Vito (78 Phil. 1 [1947]), the duly authenticated copy of the bill, signed by the proper
officers of each house, and approved by the President, is conclusive upon the courts not only of its
provisions but also of its due enactment.
4. Section 15 of Republic Act No. 8180 does not constitute undue delegation of legislative power.
Petitioners themselves admit that said section provides the Secretary of Energy and the President with
the bases of (1) “practicability,” (2) “the decline of crude oil prices in the world market,” and (3) “the
stability of the Peso exchange rate in relation to the US Dollar,” in determining the effectivity of full
deregulation. To my mind, said bases are determinate and determinable guidelines, when examined in
the light of the tests for permissible delegation.
The assailed law satisfies the completeness test as it is complete and leaves nothing more for the
Executive Branch to do but to enforce the same. Section 2 thereof expressly provides that “it shall be the
policy of the State to deregulate the downstream oil industry to 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.” This provision manifestly declares the
policy to be achieved through the delegate, that is, the full deregulation of the downstream oil industry
toward the end of full and free competition. Section 15 further provides for all the basic terms and
conditions for its execution and thus belies the argument that the Executive Branch is given complete
liberty to determine whether or not
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to implement the law. Indeed, Congress did not only make full deregulation mandatory, but likewise set
a deadline (that is, not later than March 1997), within which full deregulation should be achieved.
Congress may validly provide that a statute shall take effect or its operation shall be revived or
suspended or shall terminate upon the occurrence of certain events or contingencies the ascertainment
of which may be left to some official agency. In effect, contingent legislation may be issued by the
Executive Branch pursuant to a delegation of authority to determine some fact or state of things upon
which the enforcement of a law depends (Cruz, Phil. Political Law, 1996 ed., p. 96; Cruz vs. Youngberg,
56 Phil. 234 [1931]). This is a valid delegation since what the delegate performs is a matter of detail
whereas the statute remains complete in all essential matters. Section 15 falls under this kind of
delegated authority. Notably, the only aspect with respect to which the President can exercise
“discretion” is the determination of whether deregulation may be implemented on or before March,
1997, the deadline set by Congress. If he so decides, however, certain conditions must first be satisfied,
to wit: (1) the prices of crude oil and petroleum products in the world market are declining, and (2) the
exchange rate of the peso in relation to the US Dollar is stable. Significantly, the so-called “discretion”
pertains only to the ascertainment of the existence of conditions which are necessary for the effectivity
of the law and not a discretion as to what the law shall be.
In the same vein, I submit that the President’s issuance of Executive Order No. 392 last January 22, 1997
is valid as contingent legislation. All the Chief Executive did was to exercise his delegated authority to
ascertain and recognize certain events or contingencies which prompted him to advance the
deregulation to a date earlier than March, 1997. Anyway, the law does not prohibit him from
implementing the deregulation prior to March, 1997, as long as the standards of the law are met.
Further, the law satisfies the sufficient standards test. The words “practicable,” “declining,” and
“stable,” as used in Sec-
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tion 15 of the assailed law are sufficient standards that saliently “map out the boundaries of the
delegate’s authority by defining the legislative policy and indicating the circumstances under which it is
to be pursued and effected.” (Cruz, Phil. Political Law, 1996 ed., p. 98). Considering the normal and
ordinary definitions of these standards, I believe that the factors to be considered by the President
and/or Secretary of Energy in implementing full deregulation are, as mentioned, determinate and
determinable.
It is likewise noteworthy that the above-mentioned factors laid down by the subject law are not solely
dependent on Congress. Verily, oil pricing and the peso-dollar exchange rate are dependent on the
various forces working within the consumer market. Accordingly, it would have been unreasonable, or
even impossible, for the legislature to have provided for fixed and specific oil prices and exchange rates.
To require Congress to set forth specifics in the law would effectively deprive the legislature of the
flexibility and practicability which subordinate legislation is ultimately designed to provide. Besides, said
specifics are precisely the details which are beyond the competence of Congress, and thus, are properly
delegated to appropriate administrative agencies and executive officials to “fill in.” It cannot be gainsaid
that the detail of the timing of full deregulation has been “filled in” by the President, upon the
recommendation of the DOE, when he issued Executive Order No. 329.
5. Republic Act No. 8180 is not violative of the constitutional prohibition against monopolies,
combinations in restraint of trade, and unfair competition. The three provisions relied upon by
petitioners (Section 5[b] on tariff differential; Section 6 on the 40-day minimum inventory requirement;
and Section 9[b] on the prohibited act of predatory pricing) actually promote, rather than restrain, free
trade and competition.
The tariff differential provided in the assailed law does not necessarily make the business of importing
refined petroleum products a losing proposition for new players. First, the decision of a prospective
trader/importer (subjected to the 7% tariff rate) to compete in the downstream oil industry as a
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new player is based solely on whether he can, based on his computations, generate the desired internal
rate of return (IRR) and net present value (NPV) notwithstanding the imposition of a higher tariff rate.
Second, such a difference in tax treatment does not necessarily provide refiners of imported crude oil
with a significant level of economic advantage considering the huge amount of investments required in
putting up refinery plants which will then have to be added to said refiners’ production cost. It is not
unreasonable to suppose that the additional cost imputed by higher tariff can anyway be overcome by a
new player in the business of importation due to lower operating costs, lower capital infusion, and lower
capital carrying costs. Consequently, the resultant cost of imported finished petroleum and that of
locally refined petroleum products may turn out to be approximately the same.
The existence of a tariff differential with regard to imported crude oil and imported finished products is
nothing new or novel. In fact, prior to the passage of Republic Act No. 8180, there existed a 10% tariff
differential resulting from the imposition of a 20% tariff rate on imported finished petroleum products
and 10% on imported crude oil (based on Executive Order No. 115). Significantly, Section 5(b) of the
assailed law effectively lowered the tariff rates from 20% to 7% for imported refined petroleum
products, and 10% to 3% for imported crude oil, or a reduction of the differential from 10% to 4%. This
provision is certainly favorable to all in the downstream oil industry, whether they be existing or new
players. It thus follows that the 4% tariff differential aims to ensure the stable supply of petroleum
products by encouraging new entrants to put up oil refineries in the Philippines and to discourage fly-by-
night importers.
Further, the assailed tariff differential is likewise not violative of the equal protection clause of the
Constitution. It is germane to the declared policy of Republic Act No. 8180 which is to achieve (1) fair
prices; and (2) adequate and continuous supply of environmentally-clean and high quality petroleum
products. Said adequate and continuous supply of petroleum products will be achieved if new investors
or players are en-
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ticed to engage in the business of refining crude oil in the country. Existing refining companies, are
similarly encouraged to put up additional refining companies. All of this can be made possible in view of
the lower tariff duty on imported crude oil than that levied on imported refined petroleum products. In
effect, the lower tariff rates will enable the refiners to recoup their investments considering that they
will be investing billions of pesos in putting up their refineries in the Philippines. That incidentally the
existing refineries will be benefited by the tariff differential does not negate the fact that the intended
effect of the law is really to encourage the construction of new refineries, whether by existing players or
by new players.
As regards the 40-day inventory requirement, it must be emphasized that the 10% minimum
requirement is based on the refiners’ and importers’ annual sales volume, and hence, obviously
inapplicable to new entrants as they do not have an annual sales volume yet. Contrary to petitioners’
argument, this requirement is not intended to discourage new or prospective players in the downstream
oil industry. Rather, it guarantees “security and continuity of petroleum crude and products supply.”
(Section 6, Republic Act No. 8180) This legal requirement is meant to weed out entities not sufficiently
qualified to participate in the local downstream oil industry. Consequently, it is meant to protect the
industry from fly-by-night business operators whose sole interest would be to make quick profits and
who may prove unreliable in the effort to provide an adequate and steady supply of petroleum products
in the country. In effect, the aforestated provision benefits not only the three respondent oil companies
but all entities serious and committed to put up storage facilities and to participate as serious players in
the local oil industry. Moreover, it benefits the entire consuming public by its guarantee of an “adequate
continuous supply of environmentally-clean and high-quality petroleum products.” It ensures that all
companies in the downstream oil industry operate according to the same high standards, that the
necessary storage and distribution facilities are in place to support the level of business
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activities involved, and that operations are conducted in a safe and environmentally sound manner for
the benefit of the consuming public.
Regarding the prohibition against predatory pricing, I believe that petitioners’ argument is quite
misplaced. The provision actually protects new players by preventing, under pain of criminal sanction,
the more established oil firms from driving away any potential or actual competitor by taking undue
advantage of their size and relative financial stability. Obviously, the new players are the ones
susceptible to closing down on account of intolerable losses which will be brought about by fierce
competition with rival firms. The petitioners are merely working under the presumption that it is the
new players which would succumb to predatory pricing, and not the more established oil firms. This is
not a factual assertion but a rather baseless and conjectural assumption.
As to the alleged cartel among the three respondent oil companies, much as we suspect the same, its
existence calls for a finding of fact which this Court is not in the position to make. We cannot be called
to try facts and resolve factual issues such as this (Trade Unions of the Phils. vs. Laguesma, 236 SCRA 586
[1994]; Ledesma vs. NLRC, 246 SCRA 247 [1995]).
With respect to the amendatory bills filed by various Congressmen aimed to modify the alleged defects
of Republic Act No. 8180, I submit that such bills are the correct remedial steps to pursue, instead of the
instant petitions to set aside the statute sought to be amended. The proper forum is Congress, not this
Court.
Finally, as to the ponencia’s endnote which cites the plea of respondent oil companies for the lifting of
the restraining order against them to enable them to adjust the prices of petroleum and petroleum
products in view of the devaluation of our currency, I am pensive as to how the matter can be addressed
to the obviously defunct Energy Regulatory Board. There has been a number of price increases in the
meantime. Too much water has passed under the bridge. It is too difficult to turn back the hands of
time.
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For all the foregoing reasons, I, therefore, vote for the outright dismissal of the instant consolidated
petitions for lack of merit.
DISSENTING OPINION
FRANCISCO, J.:
The continuing peso devaluation and the spiraling cost of commodities have become hard facts of life
nowadays. And the wearies are compounded by the ominous prospects of very unstable oil prices. Thus,
with the goal of rationalizing the oil scheme, Congress enacted Republic Act No. 8180, otherwise known
as the Downstream Oil Deregulation Act of 1996, the policy of which is “to 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.”1 But if the noble and laudable
objective of this enactment is not accomplished, as to date oil prices continue to rise, can this Court be
called upon to declare the statute unconstitutional or must the Court desist from interfering in a matter
which is best left to the other branch/es of government?
The apparent thrust of the consolidated petitions is to declare, not the entirety, but only some isolated
portions of Republic Act No. 8180 unconstitutional. This is clear from the grounds enumerated by the
petitioners, to wit:
G.R. No. 124360

“4.0. Grounds:
4.1.
“THE IMPOSITION OF DIFFERENT TARIFF RATES ON IMPORTED CRUDE OIL AND IMPORTED REFINED
PETROLEUM PRODUCTS VIOLATES THE EQUAL PROTECTION OF THE LAWS.
_______________
1 Section 2, Republic Act No. 8180.
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4.2.
“THE IMPOSITION OF DIFFERENT TARIFF RATES DOES NOT DEREGULATE THE DOWNSTREAM OIL
INDUSTRY, INSTEAD, IT CONTROLS THE OIL INDUSTRY, CONTRARY TO THE AVOWED POLICY OF THE
LAW.
4.3.
“THE INCLUSION OF A TARIFF PROVISION IN SECTION 5(b) OF THE DOWNSTREAM OIL INDUSTRY
DEREGULATION LAW VIOLATES THE ‘ONE SUBJECT-ONE TITLE’ RULE EMBODIED IN ARTICLE VI, SECTION
26(1) OF THE CONSTITUTION.”2
G.R. No. 127867

“GROUNDS
“THE IMPLEMENTATION OF FULL DEREGULATION PRIOR TO THE EXISTENCE OF A TRULY COMPETITIVE

MARKET VIOLATES THE CONSTITUTION PROHIBITING MONOPOLIES, UNFAIR COMPETITION AND
PRACTICES IN RESTRAINT OF TRADE.
“R.A. NO. 8180 CONTAINS DISGUISED REGULATIONS IN A SUPPOSEDLY DEREGULATED INDUSTRY WHICH
CREATE OR PROMOTE MONOPOLY OF THE OIL INDUSTRY BY THE THREE EXISTING OIL COMPANIES.
“THE REGULATORY AND PENAL PROVISIONS OF R.A. NO. 8180 VIOLATE THE EQUAL PROTECTION OF THE
LAWS, DUE PROCESS OF LAW AND THE CONSTITUTIONAL RIGHTS OF AN ACCUSED TO BE INFORMED OF
THE NATURE AND CAUSE OF THE ACCUSATION AGAINST HIM.”3
And culled from petitioners’ arguments in support of the above grounds the provisions of Republic Act
No. 8180 which they now impugn are:
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2 Petition in G.R. No. 124360, p. 8.
3 Supplement to the Petition in G.R. No. 127867, p. 2.
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A. Section 5(b) on the imposition of tariff which provides: “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.” [Emphasis added].
B. Section 6 on the minimum inventory requirement, thus: “Security of Supply.—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.”
C. Section 9(b) on predatory pricing: “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.
“Any person, including but not limited to the chief operating officer or chief executive officer of the
corporation involved, who is found guilty of any of the said prohibited acts shall suffer the penalty of
imprisonment for three (3) years and fine ranging from Five hundred thousand pesos (P500,000) to One
million pesos (P1,000,000).”
D. Section 10 on the other prohibited acts which states: “Other Prohibited Acts.—To ensure compliance
with the provisions of this Act, the failure to comply with any of the following shall likewise be
prohibited: 1) submission of any reportorial requirements; 2)maintenance of the minimum inventory;
and, 3) use of clean and safe (environment and worker-benign) technologies.
“Any person, including but not limited to the chief operating officer or chief executive officer of the
corporation involved, who is found guilty of any of the said prohibited acts shall suffer the penalty of
imprisonment for two (2) years and fine ranging from Two hundred fifty thousand pesos (P250,000) to
Five hundred thousand pesos (P500,000).”
E. Section 15 on the implementation of full deregulation, thus: “Implementation of Full Deregulation.—

Pursuant to Section 5(e) of Republic Act No. 7683, the DOE shall, upon approval of the
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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
dollar is stable. Upon the implementation of the full deregulation as provided herein, the transition
phase is deemed terminated and the following laws are deemed repealed: x x x .” [Emphasis added].
F. Section 20 on the imposition of administrative fine: “Administrative Fine.—The DOE may, after due
notice and hearing impose a fine in the amount of not less than One hundred thousand pesos
(P100,000) but not more than One million pesos (P1,000,000) upon any person or entity who violates
any of its reportorial and minimum inventory requirements, without prejudice to criminal sanctions.”
Executive Order No. 392, entitled “Declaring Full Deregulation Of The Downstream Oil Industry” which
declared the full deregulation effective February 8, 1997, is also sought to be declared unconstitutional.
A careful scrutiny of the arguments proffered against the constitutionality of Republic Act No. 8180
betrays the petitioners’ underlying motive of calling upon this Court to determine the wisdom and
efficacy of the enactment rather than its adherence to the Constitution. Nevertheless, I shall address the
issues raised if only to settle the alleged constitutional defects afflicting some provisions of Republic Act
No. 8180. To elaborate:
A. On the imposition of tariff. Petitioners argue that the existence of a tariff provision violated the “one
subject-one title”4 rule under Article VI, Section 26(1) as the imposition of tariff rates is “inconsistent
with”5 and not at all germane to the deregulation of the oil industry. They also stress that the variance
between the seven percent (7%) duty on imported gasoline and other refined petroleum products and
three percent (3%) duty on crude oil gives a “4% tariff protection in
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5 Id.
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395
favor of Petron, Shell and Caltex which own and operate refineries here.”6 The provision, petitioners
insist, “inhibits prospective oil players to do business here because it will unnecessarily increase their
product cost by 4%.”7 In other words, the tariff rates “does not foster ‘a truly competitive market.’ ”8
Also petitioners claim that both Houses of Congress never envisioned imposing the seven percent (7%)
and three percent (3%) tariff on refined and crude oil products as both Houses advocated, prior to the
holding of the bicameral conference committee, a “zero differential.” Moreover, petitioners insist that
the tariff rates violate “the equal protection of the laws enshrined in Article III, Section 1 of the
Constitution”9 since the rates and their classification are not relevant in attaining the avowed policy of
the law, not based on substantial distinctions and limited to the existing condition.
The Constitution mandates that “every bill passed by Congress shall embrace only one subject which
shall be expressed in the title thereof.”10 The object sought to be accomplished by this mandatory
requirement has been explained by the Court in the vintage case of Central Capiz v. Ramirez,11 thus:
“The object sought to be accomplished and the mischief proposed to be remedied by this provision are
well known. Legislative assemblies, for the dispatch of business, often pass bills by their titles only
without requiring them to be read. A specious title sometimes covers legislation which, if its real
character had been disclosed, would not have commanded assent. To prevent surprise and fraud on the
legislature is one of the purposes this provision was intended to accomplish. Before the adoption of this
provision the title of a statute was often no indication of its subject or contents.
“An evil this constitutional requirement was intended to correct was the blending in one and the same
statute of such things as
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7 Id.
8 Id.
10 Article VI, Section 26(1), Constitution.
11 40 Phil. 883.
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were diverse in their nature, and were connected only to combine in favor of all the advocates of each,
thus often securing the passage of several measures no one of which could have succeeded on its own
merits. Mr. Cooley thus sums up in his review of the authorities defining the objects of this provision: ‘It
may therefore be assumed as settled that the purpose of this provision was: First, to prevent hodge-
podge or log-rolling legislation; second, to prevent surprise or fraud upon the legislature by means of
provisions in bills of which the titles gave no information, and which might therefore be overlooked and
carelessly and unintentionally adopted; and, third, to fairly apprise the people, through such publication
of legislative proceedings as is usually made, of the subjects of legislation that are being considered, in
order that they may have opportunity of being heard thereon by petition or otherwise if they shall so
desire.’ (Cooley’s Constitutional Limitations, p. 143).”12
The interpretation of “one subject-one title” rule, however, is never intended to impede or stifle
legislation. The requirement is to be given a practical rather than a technical construction and it would
be sufficient compliance if the title expresses the general subject and all the provisions of the enactment
are germane and material to the general subject.13 Congress is not required to employ in the title of an
enactment, language of such precision as to mirror, fully index or catalogue all the contents and the
minute details therein.14 All that is required is that the title should not cover legislation incongruous in
itself, and which by no fair intendment can be considered as having a necessary or proper connection.15
Hence, the title “An Act Amending Certain Sections of Republic Act Numbered One Thousand One
Hundred Ninety-Nine, otherwise known as the Agricultural Tenancy Act of the Philippines” was declared
by the Court sufficient to contain a provision empowering the Secretary of Justice, acting through a
tenancy mediation division, to carry out a national enforce-
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12 40 Phil., at p. 891.
13 Sumulong v. Commission on Elections, 73 Phil. 288, 291.
14 Lidasan v. Commission on Elections, 21 SCRA 496, 501.
15 Blair v. Chicago, 26 S. Ct. 427, 201 U.S. 400, 50 L. Ed. 801.
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ment program, including the mediation of tenancy disputes.16 The title “An Act Creating the Videogram
Regulatory Board” was similarly declared valid and sufficient to embrace a regulatory tax provision, i.e.,
the imposition of a thirty percent (30%) tax on the purchase price or rental rate, as the case may be, for
every sale, lease or disposition of a videogram containing a reproduction of any motion picture or
audiovisual program with fifty percent (50%) of the proceeds of the tax collected accruing to the
province and the other fifty percent (50%) to the municipality where the tax is collected.17 Likewise, the
title “An Act To Further Amend Commonwealth Act Numbered One Hundred Twenty, as amended by
Republic Act Numbered Twenty Six Hundred and Forty One” was declared sufficient to cover a provision
limiting the allowable margin of profit to not more than twelve percent (12%) annually of its
investments plus two-month operating expenses for franchise holder receiving at least fifty percent
(50%) of its power from the National Power Corporation.18
In the case at bar, the title “An Act Deregulating The Downstream Oil Industry, And For Other Purposes”
is adequate and comprehensive to cover the imposition of tariff rates. The tariff provision under Section
5(b) is one of the means of effecting deregulation. It must be observed that even prior to the passage of
Republic Act No. 8180 oil products have always been subject to tariff and surely Congress is cognizant of
such fact. The imposition of the seven percent (7%) and three percent (3%) duties on imported gasoline
and refined petroleum products and on crude oil, respectively, are germane to the deregulation of the
oil industry. The title, in fact, even included the broad and all-encompassing phrase “And For Other
Purposes” thereby indicating the legislative intent to cover anything that has some relation to or
connection with the deregulation of the oil industry. The tax provision is a mere tool and mechanism
considered essential by
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16 Cordero v. Cabatuando, 6 SCRA 418.

17 Tio v. Videogram Regulatory Board, 151 SCRA 208.
18 Alalayan v. National Power Corp., 24 SCRA 172.
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398
Congress to fulfill Republic Act No. 8180’s objective of fostering a competitive market and achieving the
social policy objectives of fair prices. To curtail any adverse impact which the tariff treatment may cause
by its application, and perhaps in answer to petitioners’ apprehension Congress included under the
assailed section a proviso that will effectively eradicate the tariff difference in the treatment of refined
petroleum products and crude oil by stipulating “that beginning on January 1, 2004 the tariff rate on
imported crude oil and refined petroleum products shall be the same.”
The contention that tariff “does not foster a truly competitive market”19 and therefore restrains trade
and does not help achieve the purpose of deregulation is an issue not within the power of the Court to
resolve. Nonetheless, the Court’s pronouncement in Tio vs. Videogram Regulatory Board appears to be
worth reiterating:
“Petitioner also submits that the thirty percent (30%) tax imposed is harsh and oppressive, confiscatory,
and in restraint of trade. However, it is beyond serious question that a tax does not cease to be valid
merely because it regulates, discourages, or even definitely deters the activities taxed. The power to
impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to
declare that it is subject to any restrictions whatever, except such as rest in the discretion of the
authority which exercises it. In imposing a tax, the legislature acts upon its constituents. This is, in
general, a sufficient security against erroneous and oppressive taxation.”20 [Emphasis added]
Anent petitioners’ claim that both House Bill No. 5264 and Senate Bill No. 1253, [the precursor bills of
Republic Act No. 8180], “did not impose any tariff rates but merely set the policy of ‘zero differential’ in
the House version, and nothing in the Senate version”21 is inconsequential. Suffice it to state that the
bicameral conference committee report was approved
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20 151 SCRA at 215.
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399
by the conferees thereof only “after full and free conference” on the disagreeing provisions of Senate
Bill No. 1253 and House Bill No. 5264. Indeed, the “zero differential” on the tariff rates imposed in the
House version was embodied in the law, save for a slight delay in its implementation to January 1, 2004.
Moreover, any objection on the validity of provisions inserted by the legislative bicameral conference
committee has been passed upon by the Court in the recent case of Tolentino v. Secretary of Finance,22
which, in my view, laid to rest any doubt as to the validity of the bill emerging out of a Conference
Committee. The Court in that case, speaking through Mr. Justice Mendoza, said:
“As to the possibility of an entirely new bill emerging out of a Conference Committee, it has been
explained:
‘Under congressional rules of procedure, conference committees are not expected to make any material
change in the measure at issue, either by deleting provisions to which both houses have already agreed
or by inserting new provisions. But this is a difficult provision to enforce. Note the problem when one
house amends a proposal originating in either house by striking out everything following the enacting
clause and substituting provisions which make it an entirely new bill. The versions are now altogether
different, permitting a conference committee to draft essentially a new bill . . .’
“The result is a third version, which is considered an ‘amendment in the nature of a substitute,’ the only
requirement for which being that the third version be germane to the subject of the House and Senate
bills.
“Indeed, this Court recently held that it is within the power of a conference committee to include in its
report an entirely new provision that is not found either in the House bill or in the Senate bill. If the
committee can propose an amendment consisting of one or two provisions, there is no reason why it
cannot propose several provisions, collectively considered as an ‘amendment in the nature of a
substitute,’ so long as such amendment is germane to the subject of the bills before the committee.
After all, its report was not final but needed the approval of both houses of Congress to become valid as
an act of the legislative department. The charge that in this case the
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22 235 SCRA 632.
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400
Conference Committee acted as a third legislative chamber is thus without any basis.
x x x x x x x x x
“To be sure, nothing in the Rules [of the Senate and the House of Representatives] limits a conference
committee to a consideration of conflicting provisions. But Rule XLVI, (Sec.) 112 of the Rules of the
Senate is cited to the effect that ‘If there is no Rule applicable to a specific case the precedents of the
Legislative Department of the Philippines shall be resorted to, and as a supplement of these, the Rules
contained in Jefferson’s Manual.’ The following is then quoted from the Jefferson’s Manual.
‘The managers of a conference must confine themselves to the differences committed to them . . . and
may not include subjects not within disagreements, even though germane to a question in issue.’
“Note that, according to Rule XLIX, (Sec.) 112, in case there is no specific rule applicable, resort must be
to the legislative practice. The Jefferson’s Manual is resorted to only as supplement. It is common place
in Congress that conference committee reports include new matters which, though germane, have not
been committed to the committee. This practice was admitted by Senator Raul S. Roco, petitioner in G.R.
No. 115543, during the oral argument in these cases. Whatever, then, may be provided in the
Jefferson’s Manual must be considered to have been modified by the legislative practice. If a change is
desired in the practice it must be sought in Congress since this question is not covered by any
constitutional provision but is only an internal rule of each house. Thus, Art. VI, (Sec.) 16(3) of the
Constitution provides that ‘Each House may determine the rules of its proceedings. . .’
“This observation applies to the other contention that the Rules of the two chambers were likewise
disregarded in the preparation of the Conference Committee Report because the Report did not contain
a ‘detailed and sufficiently explicit statement of changes in, or amendments to, the subject measure.’
The Report used brackets and capital letters to indicate the changes. This is a standard practice in bill-
drafting. We cannot say that in using these marks and symbols the Committee violated the Rules of the
Senate and the House. Moreover, this Court is not the proper forum for the enforcement of these
internal Rules. To the contrary, as we have already ruled, ‘parliamentary rules are merely procedural
and with their observance the courts have no concern.’ Our concern is with the
401
401
procedural requirements of the Constitution for the enactment of laws. As far as these requirements are
concerned, we are satisfied that they have been faithfully observed in these cases.”23
The other contention of petitioners that Section 5(b) “violates the equal protection of the laws
enshrined in Article III, Section 1 of the Constitution”24 deserves a short shrift for the equal protection
clause does not forbid reasonable classification based upon substantial distinctions where the
classification is germane to the purpose of the law and applies equally to all the members of the class.
The imposition of three percent (3%) tariff on crude oil, which is four percent (4%) lower than those
imposed on refined oil products, as persuasively argued by the Office of the Solicitor General, is based
on the substantial distinction that importers of crude oil, by necessity, have to establish and maintain
refinery plants to process and refine the crude oil thereby adding to their production costs. To
encourage these importers to set up refineries involving huge expenditures and investments which
peddlers and importers of refined petroleum products do not shoulder, Congress deemed it appropriate
to give a lower tariff rate to foster the entry of new “players” and investors in line with the law’s policy
to create a competitive market. The residual contention that there is no substantial distinction in the
imposition of seven percent (7%) and three percent (3%) tariff since the law itself will level the tariff
rates between the imported crude oil and refined petroleum products come January 1, 2004, to my
mind, is addressed more to the legislative’s prerogative to provide for the duration and period of
effectivity of the imposition. If Congress, after consultation, analysis of material data and due
deliberations, is convinced that by January 1, 2004, the investors and importers of crude oil would have
already recovered their huge investments and expenditures in establishing refineries and plants then it
is within its prerogative to lift the tariff differential. Such matter is well within the pale of legislative
power
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23 235 SCRA at pp. 667-671.
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402
which the Court may not fetter. Besides, this again is in line with Republic Act No. 8180’s avowed policy
to foster a truly competitive market which can achieve the social policy objectives of fair, if not lower,
prices.
B. On the minimum inventory requirement. Petitioners’ attack on Section 6 is premised upon their belief
that the inventory requirement is hostile and not conducive for new oil companies to operate here, and
unduly favors Petron, Shell and Caltex, companies which according to them can easily hurdle the
requirement. I fail to see any legal or constitutional issue here more so as it is not raised by a party with
legal standing for petitioners do not claim to be the owners or operators of new oil companies affected
by the requirement. Whether or not the requirement is advantageous, disadvantageous or conducive
for new oil companies hinges on presumptions and speculations which is not within the realm of judicial
adjudication. It may not be amiss to mention here that according to the Office of the Solicitor General
“there are about thirty (30) new entrants in the downstream activities x x x, fourteen (14) of which have
started operation x x x, eight (8) having commenced operation last March 1997, and the rest to operate
between the second quarter of 1997 and the year 2000.”25 Petitioners did not controvert this averment
which thereby cast serious doubt over their claim of “hostile” environment.
C. On predatory pricing. What petitioners bewail the most in Section 9(b) is “the definition of ‘predatory
pricing’ [which] is too broad in scope and indefinite in meaning”26 and the penal sanction imposed for
its violation. Petitioners maintain that it would be the new oil companies or “players” which would lower
their prices to gain a foothold on the market and not Petron, Shell or Caltex, an occasion for these three
big oil “companies” to control the prices by keeping their average
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25 Comment of the Office of the Solicitor General in G.R. No. 127867, p. 33; Rollo, p. 191.
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403
cost at a level which will ensure their desired profit margin.27 Worse, the penal sanction, they add,
deters new “players” from entering the oil market and the practice of lowering prices is now condemned
as a criminal act.
Petitioners’ contentions are nebulous if not speculative. In the absence of any concrete proof of
evidence, the assertion that it will only be the new oil companies which will lower oil prices remains a
mere guess or suspicion. And then again petitioners are not the proper party to raise the issue. The
query on why lowering of prices should be penalized and the broad scope of predatory pricing is not for
this Court to traverse the same being reserved for Congress. The Court should not lose sight of the fact
that its duty under Article 5 of the Revised Penal Code is not to determine, define and legislate what act
or acts should be penalized, but simply to report to the Chief Executive the reasons why it believes an
act should be penalized, as well as why it considers a penalty excessive, thus:
“ART. 5. Duty of the court in connection with acts which should be repressed but which are not covered
by the law, and in cases of excessive penalties.—Whenever a court has knowledge of any act which it
may deem proper to repress and which is not punishable by law, it shall render the proper decision, and
shall report to the Chief Executive, through the Department of Justice, the reasons which induce the
court to believe that said act should be made the subject of legislation.
“In the same way the court shall submit to the Chief Executive, through the Department of Justice, such
statement as may be deemed proper, without suspending the execution of the sentence, when a strict
enforcement of the provisions of this Code would result in the imposition of a clearly excessive penalty,
taking into consideration the degree of malice and the injury caused by the offense.”
Furthermore, in the absence of an actual conviction for violation of Section 9(b) and the appropriate
appeal to this Court, I fail to see the need to discuss any longer the issue as it is not ripe for judicial
adjudication. Any pronouncement on the legality of the sanction will only be advisory.
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27 Id.
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404
D. On other prohibited acts. In discussing their objection to Section 10, together with Section 20,
petitioners assert that these sanctions “even provide stiff criminal and administrative penalties for
failure to maintain said minimum requirement and other regulations” and posed this query: “Are these
provisions consistent with the policy objective to level the playing [field] in a truly competitive
answer?”28 A more circumspect analysis of petitioners’ grievance, however, does not present any legal
controversy. At best, their objection deals on policy considerations that can be more appropriately and
effectively addressed not by this Court but by Congress itself.
E. On the implementation of full deregulation under Section 15, and the validity of Executive Order No.
392. Petitioners stress that “Section 15 of Republic Act No.8180 delegates to the Secretary of Energy and
to the President of the Philippines the power to determine when to fully deregulate the downstream oil
industry”29 without providing for any standards “to determine when the prices of crude oil in the world
market are considered to be ‘declining’ ”30 and when may the exchange rate be considered “stable” for
purposes of determining when it is “practicable” to declare full deregulation.31 In the absence of
standards, Executive Order No. 392 which implemented Section 15 constitute “executive lawmaking,”32
hence the same should likewise be struck down as invalid. Petitioners additionally decry the brief seven
(7) month transition period under Section 15 of Republic Act No. 8180. The premature full deregulation
declared in Executive Order No. 392 allowed Caltex, Petron and Shell oil companies “to define the
conditions under which any ‘new players’ will have to adhere to in order to become competitive in the
new deregulated market even before such a market has been created.”33
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30 Id.
31 Id.
32 Id., p. 10.
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Petitioners are emphatic that Section 15 and Executive Order No. 392 “have effectively legislated a
cartel among respondent oil companies, directly violating the Constitutional prohibition against unfair
trade practices and combinations in restraint of trade.”34
Section 15 of Republic Act No. 8180 provides for the implementation of full deregulation. It states:
Section 15 on the implementation of full deregulation, thus: “Implementation of Full Deregulation.—

Pursuant to Section 5(e) of Republic Act No. 7683, 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
dollar is stable. Upon the implementation of the full deregulation as provided herein, the transition
phase is deemed terminated and the following laws are deemed repealed: x x x.”[Emphasis added].
It appears from the foregoing that deregulation has to be implemented “not later than March 1997.”
The provision is unequivocal, i.e., deregulation must be implemented on or before March 1997. The
Secretary of Energy and the President is devoid of any discretion to move the date of full deregulation to
any day later than March 1997. The second sentence which provides that “[a]s 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” did
not modify or reset to any other date the full deregulation of downstream oil industry. Not later than
March 1997 is a complete and definite period for full deregulation. What is conferred to the Department
of Energy in the implementation of full deregulation, with the approval of the President, is not the
power and discretion on what the law should be. The provision of Section 15 gave the President the
authority to proceed with deregulation on or before, but not
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34 Id.
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406
after, March 1997, and if implementation is made before March, 1997, to execute the same, if possible,
when the prices of crude oil and petroleum products in the world market are declining and the peso-
dollar exchange rate is stable. But if the implementation is made on March, 1997, the President has no
option but to implement the law regardless of the conditions of the prices of oil in the world market and
the exchange rates.
The settled rule is that the legislative department may not delegate its power. Any attempt to abdicate it
is unconstitutional and void, based on the principle of potestas delegata non delegare potest. In testing
whether a statute constitutes an undue delegation of legislative power or not, it is usual to inquire
whether the statute was complete in all its terms and provisions when it left the hands of the legislative
so that nothing was left to the judgment of any other appointee or delegate of the legislature.35 An
enactment is said to be incomplete and invalid if it does not lay down any rule or definite standard by
which the administrative officer may be guided in the exercise of the discretionary powers delegated to
it.36 In People v. Vera,37 the Court laid down a guideline on how to distinguish which power may or
may not be delegated by Congress, to wit:
“ ‘The true distinction,’ says Judge Ranney, ‘is between the delegation of power to make the law, which
necessarily involves a discretion as to what it shall be, and conferring an 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.’ (Cincinnati, W. & Z.R. Co. vs. Clinton County Comrs. [1852]; 1 Ohio St., 77,
88 See also, Sutherland on Statutory Construction, sec. 68.)”
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35 People v. Vera, 65 Phil. 56, 115, citing 6. R.C.L., p. 165.
36 Id., at p. 116, citing Scheter v. U.S., 295 U.S., 495; 79 L. Ed., 1570; 55 Supt. Ct. Rep. 837; 97 A.L.R. 947;
People ex rel.; Rice v. Wilson Oil Co., 364 Ill. 406; 4 N.E. [2d], 847; 107 A.L.R., 1500.
37 Id., at p. 117.
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407
Applying these parameters, I fail to see any taint of unconstitutionality that could vitiate the validity of
Section 15. The discretion to ascertain when may the prices of crude oil in the world market be deemed
“declining” or when may the peso-dollar exchange rate be considered “stable” relates to the assessment
and appreciation of facts. There is nothing essentially legislative in ascertaining the existence of facts or
conditions as the basis of the taking into effect of a law38 so as to make the provision an undue
delegation of legislative power. The alleged lack of definitions of the terms employed in the statute does
not give rise to undue delegation either for the words of the statute, as a rule, must be given its literal
meaning.39 Petitioners’ contentions are concerned with the details of execution by the executive
officials tasked to implement deregulation. No proviso in Section 15 may be construed as objectionable
for the legislature has the latitude to provide that a law may take effect upon the happening of future
specified contingencies leaving to some other person or body the power to determine when the
specified contingency has arisen.40 The instant petition is similarly situated with the past cases, as
summarized in the case of People v. Vera, where the Court ruled for the validity of several assailed
statutes, to wit:
“To the same effect are decisions of this court in Municipality of Cardona vs. Municipality of Binangonan
([1917], 36 Phil. 547); Rubi vs. Provincial Board of Mindoro ([1919], 39 Phil. 660), and Cruz vs. Youngberg
([1931], 56 Phil. 234). In the first of these cases, this court sustained the validity of a law conferring upon
the GovernorGeneral authority to adjust provincial and municipal boundaries. In the second case, this
court held it lawful for the legislature to direct non-Christian inhabitants to take up their habitation on
unoccupied lands to be selected by the provincial governor and approved by the provincial board. In the
third case, it was held proper for the legislature to vest in the Governor-General authority to suspend or
not, at
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38 Id., at p. 118.
39 Globe-Mackay Cable and Radio Corporation v. NLRC, 206 SCRA 701, 711.
40 People v. Vera, supra, at pp. 119-120.
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his discretion, the prohibition of the importation of foreign cattle, such prohibition to be raised ‘if the
conditions of the country make this advisable or if disease among foreign cattle has ceased to be a
menace to the agriculture and livestock of the lands.’ ”41
If the Governor-General in the case of Cruz v. Youngberg42 can “suspend or not, at his discretion, the
prohibition of the importation of cattle, such prohibition to be raised ‘if the conditions of the country
make this advisable or if disease among foreign cattles has ceased to be a menace to the agriculture and
livestock of the lands” then with more reason that Section 15 of Republic Act No. 8180 can pass the
constitutional challenge as it has mandatorily fixed the effectivity date of full deregulation to not later
than March 1997, with or without the occurrence of stable peso-dollar exchange rate and declining oil
prices. Contrary to petitioners’ protestations, therefore, Section 15 is complete and contains the basic
conditions and terms for its execution.
To restate, the policy of Republic Act No. 8180 is to deregulate the downstream oil industry and to
foster a truly competitive market which could lead to fair prices and adequate supply of environmentally
clean and high-quality petroleum products. This is the guiding principle installed by Congress upon
which the executive department of the government must conform. Section 15 of Republic Act No. 8180
sufficiently supplied the metes and bounds for the execution of full deregulation. In fact, a cursory
reading of Executive Order No. 39243 which advanced deregulation to February 8,
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41 Id., at pp. 117-118.
42 56 Phil. 234.
43 Executive Order No. 392 provides in full as follows:
“EXECUTIVE ORDER NO. 392

“DECLARING FULL DEREGULATION OF THE
DOWNSTREAM OIL INDUSTRY
“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
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409
1997 convincingly shows the determinable factors or standards, enumerated under Section 15, which
were taken into
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the President, institute the programs and timetable 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 the
full deregulation of the downstream oil industry not later than March, 1997. As far as practicable, the
DOE shall time the full deregulation when the prices of crude oil and petroleum products in the world
market are declining and when the exchange rate of the peso in relation to the US dollar is stable’;
“WHEREAS, pursuant to the recommendation of the Department of Energy, there is an imperative need
to implement the full deregulation of the downstream oil industry because of the following recent
developments: (i) depletion of the buffer fund on or about 7 February 1997 pursuant to the Energy
Regulatory Board’s Order dated 16 January 1997; (ii) the prices of crude oil had been stable at $21-$23
per barrel since October 1996 while prices of petroleum products in the world market had been stable
since mid-December of last year. Moreover, crude oil prices are beginning to soften for the last few days
while prices of some petroleum products had already declined; and (iii) the exchange rate of the peso in
relation to the US dollar has been stable for the past twelve (12) months, averaging at around P26.20 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
410
410
account by the Chief Executive in declaring full deregulation. I cannot see my way clear on how or why
Executive Order No. 392, as professed by petitioners, may be declared unconstitutional for adding the
“depletion of buffer fund” as one of the grounds for advancing the deregulation. The enumeration of
factors to be considered for full deregulation under Section 15 did not proscribe the Chief Executive
from acknowledging other instances that can equally assuage deregulation. What is important is that
the Chief Executive complied with and met the minimum standards supplied by the law. Executive Order
No. 392 may not, therefore, be branded as unconstitutional.
Petitioners’ vehement objections on the short seven (7) month transition period under Section 15 and
the alleged resultant de facto formation of cartel are matters which fundamentally strike at the wisdom
of the law and the policy adopted by Congress. These are outside the power of the courts to settle; thus
I fail to see the need to digress any further.
F. On the imposition of administrative fine. The administrative fine under Section 20 is claimed to be
inconsistent with deregulation. The imposition of administrative fine for failure to meet the reportorial
and minimum inventory requirements, far from petitioners’ submission, are geared towards
accomplishing the noble purpose of the law. The inventory requirement ensures the security and
continuity of petroleum crude and products supply,44 while the reportorial requirement is a mere
devise for the Department of Energy to
_______________
me by law, do hereby declare the full deregulation, of the downstream oil industry.
“This Executive Order shall take effect on 8 February 1997.
“DONE in the City of Manila, this 22nd day of January in the year of Our Lord, Nineteen Hundred and
Ninety-Seven.
(Signed)
FIDEL V. RAMOS”
44 Section 6, Republic Act No. 8180.
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411
monitor compliance with the law. In any event, the issue pertains to the efficacy of incorporating in the
law the administrative sanctions which lies outside the Court’s sphere and competence.
In fine, it seems to me that the petitions dwell on the insistent and recurrent arguments that the
imposition of different tariff rates on imported crude oil and imported petroleum products is violative of
the equal protection clause of the constitution; is not germane to the purpose of the law; does not
foster a truly competitive market; extends undue advantage to the existing oil refineries or companies;
and creates a cartel or a monopoly of sort among Shell, Caltex and Petron in clear contravention of the
Constitutional proscription against unfair trade practices and combinations in restraint of trade.
Unfortunately, this Court, in my view, is not at liberty to tread upon or even begin to discuss the merits
and demerits of petitioners’ stance if it is to be faithful to the time honored doctrine of separation of
powers—the underlying principle of our republican state.45 Nothing is so fundamental in our system of
government than its division into three distinct and independent branches, the executive, the legislative
and the judiciary, each branch having exclusive cognizance of matters within its jurisdiction, and
supreme within its own sphere. It is true that there is sometimes an inevitable overlapping and
interlacing of functions and duties between these departments. But this elementary tenet remains: the
legislative is vested with the power to make law, the judiciary to apply and interpret it. In cases like this,
“the judicial branch of the government has only one duty—to lay the article of the Constitution which is
invoked beside the statute which is challenged and to decide whether the latter squares with the
former.”46 This having been done and finding no constitutional infirmity therein, the Court’s task is
finished. Now whether or not the law fails to achieve its avowed policy because Congress did not
_______________
45 Article II, Section 1, 1987 Constitution.
46 United States v. Butler, 297 U.S. 1.
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412

carefully evaluate the long term effects of some of its provisions is a matter clearly beyond this Court’s
domain.
Perhaps it bears reiterating that the question of validity of every statute is first determined by the
legislative department of the government, and the courts will resolve every presumption in favor of its
validity. The courts will assume that the validity of the statute was fully considered by the legislature
when adopted. The wisdom or advisability of a particular statute is not a question for the courts to
determine. If a particular statute is within the constitutional power of the legislature to enact, it should
be sustained whether the courts agree or not in the wisdom of its enactment.47 This Court continues to
recognize that in the determination of actual cases and controversies, it must reflect the wisdom and
justice of the people as expressed through their representatives in the executive and legislative
branches of government. Thus, the presumption is always in favor of constitutionality for it is likewise
always presumed that in the enactment of a law or the adoption of a policy it is the people who speak
through their representatives. This principle is one of caution and circumspection in the exercise of the
grave and delicate function of judicial review.48 Explaining this principle Thayer said,
“It can only disregard the Act when those who have the right to make laws have not merely made a
mistake, but have made a very clear one-so clear that it is not open to rational question. That is the
standard of duty to which the courts bring legislative acts; that is the test which they apply-not merely
their own judgment as to constitutionality, but their conclusion as to what judgment is permissible to
another department which the constitution has charged with the duty of making it. This rule recognizes
that, having regard to the great, complex, ever-unfolding exigencies of government, much will seem
unconstitutional to one man, or body of men, may reasonably not seem so to another; that the
constitution often admits of different interpretations; that there is often a range of choice and
judgment; that in such cases the constitution does not
_______________
47 Case v. Board of Health, 24 Phil. 250, 276.
48 The Lawyers Journal, January 31, 1949, p. 8.
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413
impose upon the legislature any one specific opinion, but leaves open their range of choice; and that
whatever choice is rational is constitutional.”49
The petitions discuss rather extensively the adverse economic implications of Republic Act No. 8180.
They put forward more than anything else, an assertion that an error of policy has been committed.
Reviewing the wisdom of the policies adopted by the executive and legislative departments is not within
the province of the Court.
It is safe to assume that the legislative branch of the government has taken into consideration and has
carefully weighed all points pertinent to the law in question. We cannot doubt that these matters have
been the object of intensive research and study nor that they have been subject of comprehensive
consultations with experts and debates in both houses of Congress. Judicial review at this juncture will
at best be limited and myopic. For admittedly, this Court cannot ponder on the points raised in the
petitions with the same technical competence as that of the economic experts who have contributed
valuable hours of study and deliberation in the passage of this law.
I realize that to invoke the doctrine of separation of powers at this crucial time may be viewed by some
as an act of shirking from our duty to uphold the Constitution at all cost. Let it be remembered,
however, that the doctrine of separation of powers is likewise enshrined in our Constitution and
deserves the same degree of fealty. In fact, it carries more significance now in the face of an onslaught
of similar cases brought before this Court by the opponents of almost every enacted law of major
importance. It is true that this Court is the last bulwark of justice and it is our task to preserve the
integrity of our fundamental law. But we cannot become, wittingly or unwittingly, instruments of every
aggrieved minority and losing legislator. While the laudable objectives of the law
_______________
49 Id., citing Thayer, James B., “The Origin and Scope of the American Doctrine of Constitutional Law,” p.
9.
414
414
are put on hold, this Court is faced with the unnecessary burden of disposing of issues merely contrived
to fall within the ambit of judicial review. All that is achieved is delay which is perhaps, sad to say, all
that may have been intended in the first place.
Indeed, whether Republic Act No. 8180 or portions thereof are declared unconstitutional, oil prices may
continue to rise, as they depend not on any law but on the volatile market and economic forces. It is
therefore the political departments of government that should address the issues raised herein for the
discretion to allow a deregulated oil industry and to determine its viability is lodged with the people in
their primary political capacity, which as things stand, has been delegated to Congress.
In the end, petitioners are not devoid of a remedy. To paraphrase the words of Justice Padilla in
Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas v. Tan,50 if petitioners seriously believe that
the adoption and continued application of Republic Act No. 8180 are prejudicial to the general welfare
or the interests of the majority of the people, they should seek recourse and relief from the political
branches of government, as they are now doing by moving for an amendment of the assailed provisions
in the correct forum which is Congress or for the exercise of the people’s power of initiative on
legislation. The Court following the time honored doctrine of separation of powers, cannot substitute its
judgment for that of the Congress as to the wisdom, justice and advisability of Republic Act No. 8180.51
ACCORDINGLY, finding no merit in the instant petitions I vote for their outright dismissal.
Petitions granted. R.A. No. 8180 declared unconstitutional and E.O. No. 372 void Tatad vs. Secretary of
the Department of Energy, 281 SCRA 330, G.R. No. 124360, G.R. No. 127867 November 5, 1997

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Tatad vs.

Secretary of the Department of Energy

G.R. No. 124360. November 5, 1997.*

VOL. 281, NOVEMBER 5, 1997

KAPUNAN, J., Separate Opinion

PANGANIBAN, J., Concurring Opinion

SUPREME COURT REPORTS ANNOTATED