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CONSTITUTIONAL LAW

CHAPTER III THE EQUAL PROTECTION CLAUSE


nor shall any person be denied the equal protection of the laws.

1. The scope of the equal protection clause, 95 SCRA 420

2. Equal protection of the law, 13 SCRA 266

3. Requisites for a valid classification-

Read:

1. People vs. Cayat, 68 Phil. 12

a. There must be real and substantial distinctions;

b. It must be germane tot he purposes of the law;

c. It must not be limited to existing conditions only; and

d. It must apply equally to all members of the same class.

2. Read again, Association of Small Landowners vs. Sec. of Agrarian reform, July 14, 1989

4. Equal protection in general-

Read:

1. P. vs. Vera, 65 Phil. 56

2. TIU VS. CA, 301 SCRA 278 (There is real and substantial distinction between business
inside the Subic Special Economic Zone and outside wherein those inside are exempt from other
taxes as a result of the policy of the government to accelerate the development of the portion of
Subic left by the Americans)

3. MELDA MARCOS VS. CA, 278 SCRA 843

4. HIMAGAN VS. PEOPLE, October 7, 1994

The fact that policemen charged with a criminal offense punishable by more than 6 years are to
be suspended during the entire duration of the case unlike other government employees is valid
since it rests on valid classification because policemen carry weapons and the badge of the law
which can be used to harass or intimidate witnesses against them.

2-A Gumabon vs. Director of Prisons, 37 SCRA 420


2-b. PANFILO LACSON VS. SANDIGANBAYAN, January 20, 1999

2-b-1. BASCO VS. PAGCOR, May 14, 1991

No violation of the equal protection clause if Congress would legalize cock-fighting and horse
racing since police power could regulate gambling.

1. PHILIPPINE JUDGES ASSOCIATION VS. PRADO, November 11, 1993

There is no valid distinction for a law removing the franking privilege of the judiciary while
leaving the same to the Executive and Legislative despite the fact that there is considerable
volume of mails from the courts. Loss of revenue is not a valid ground unless it would be
withdrawn to all government offices.

FRANCISCO TATAD vs. THE SECRETARY OF DEPARTMENT OF ENERGY, G. R. No. 124360, November
5, 1997

EDCEL LAGMAN, JOKER ARROYO, ENRIQUE GARCIA, WIGBERTO TANADA, FLAG HUMAN RIGHTS
FOUNDATION vs. HON. RUBEN TORRES, HON. FRANCISCO VIRAY, PETRON, FILIPINAS SHELL and
CALTEX PHILIPPINES, G.R. No. 127867, November 5, 1997.
PUNO, J.
These petitions challenge the constitutionality of Republic Act No. 8180 entitled An Act
Deregulating the Downstream Oil Industry and for Other Purposes. RA 8180 seeks to end 26
years of government regulation of the downstream oil industry.
The facts:

1. Prior to 1971, no government agency was regulating the oil industry. New players were
free to enter the oil market without any government interference. There were four (4) refining
companies at that time. SHELL, CALTEX, BATAAN REFINING COMPANY and FILOIL MARKETING and
six (6) petroleum marketing companies: ESSO, FILOIL, CALTEX, GETTY, MOBIL and SHELL;

2. In 1971, the country was driven to its knees by the crippling oil crisis and in order to
remedy the same, the OIL INDUSTRY COMMISSION ACT was enacted REGULATING the oil industry ;

3. On November 9, 1973, then President Marcos created the Philippine national Oil
Corporation (PNOC) t break the control of the foreigners to the oil industry. It acquired ownership
of ESSO Philippines and Filoil and likewise bought controlling shares of the Bataan Refining
Corporation. PNOC then operated under the business name PETRON CORPORATION and for the
first time, there was a Filipino presence in the Philippine oil market;

4. In 1984, Pres. Marcos through section 8 of PD 1956 created the OIL PRICE STABILIZATION
FUND (OPSF) to cushion the effects of frequent changes in the price of oil caused by the exchange
rate adjustments or increase of the world market prices crude oil and imported petroleum
products;

5. By 1985, only three (3) oil companies were left operating in the country. These are:
CALTEX, FILIPINAS SHELL and PNOC;

6. In May, 1987, Pres. Corazon Aquino signed Executive Order No. 172 creating the ENERGY
REULATORY BOARD to regulate the business of importing, exporting, shipping, transporting,
processing, refining, marketing and distributing energy resources WHEN WARRANTED AND
ONLY WHEN PUBLIC NECESSITY REQUIRES. The Board was empowered to fix and regulate the
prices of petroleum products and other related merchandise;

7. In March, 1996, Congress enacted RA 8180 deregulating the Oil Industry not later than
March, 1997. The law requires that the implementation of the regulation, shall as far as
practicable be made at a time WHEN THE PRICES OF CRUDE OIL AND PETROLEUM PRODUCTS IN
THE WORLD ARE DECLINING AND WHEN THE EXCHANGE RATE OF THE PESO IN RELATION TO THE US
DOLLAR; IS STABLE;

8. On February 8, 1997, Executive Order No. 372 was issued by President


Fidel Ramos implementing full deregulation ON THE GROUND THAT THE OPSF FUND HAS BEEN
DEPLETED;

9. The petitioners questioned the constitutionality of RA 8180 on the following grounds:

a. Section 5 of RA 8180 violates the equal protection clause of the Constitution;

b. The imposition of different tariff rates does not deregulate the oil industry and even
bars the entry of other players in the oil industry but instead effectively protects the interest of
the oil companies with existing refineries. Thus, it runs counter to the objective of the law to
foster a truly competitive market; The inclusion of Sec. 5 [b] providing for tariff differential
violates Section 26 [1] of Art. VI of the 1987 Constitution which requires every law to have only
one subject which should be expressed in the title thereof;

c. Section 15 of RA 8180 and EO No. 392 are unconstitutional for undue delegation of
legislative power to the President and the Secretary of Energy;

d. EO 392 implementing the full deregulation of the oil industry is unconstitutional since it
is arbitrary and unreasonable since it was enacted due to the alleged depletion of the OPSF fund,
a condition which is not found in RA No. 8180;

e. Section 15 of RA 8180 is unconstitutional for it allows the formation of a de facto


cartel among three existing oil companies in violation of the Constitution prohibiting against
monopolies, combination in restraint of trade and unfair competition.
The provisions of the law being questioned as unconstitutional are Section 5 [b] and Section 15
which provide:

Section 5 [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 (7%) percent, except fuel oil
and LPG, the rate for which shall be the same; 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.

xxx

Section 15. Implementation of full deregulation. Pursuant to Section 5 [e] of RA 7638, the
DOE, upon approval of the President, implement full deregulation of the downstream oil
industry not later than March, 1997. As far as practicable, the DOE shall time the full
deregulation when the prices of crude oil and petroleum products in the world market are
declining and when the exchange rate of the peso in relation to the US dollar is stable.
The issues are:
Procedural Issues:

a. Whether or not the petitions raise justiciable controversy; and

b. Whether or not the petitioners have the standing to question the validity of the
subject law and executive order.

Substantive Issues:

a. Whether or not Section 5 of RA 8180 violates the one titleone subject requirement of
the Constitution;

b. Whether or not Section 5 of RA 8180 violates the equal protection clause of the
Constitution;

c. Whether section 15 violates the constitutional prohibition on undue delegation of


legislative power;

d. Whether or not EO 392 is arbitrary and unreasonable; and

e. Whether or not RA 8180 violates the constitutional prohibition against monopolies,


combinations in restraint of trade and unfair competition.

HELD:
1. Judicial power includes not only the duty of the courts to settle controversies involving
rights 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 agency or branch 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. When the
statute violates the Constitution, it is not only the right of the judiciary to declare such act as
unconstitutional and void.

2. The question of locus standi must likewise fall . As held in KAPATIRAN NG MGA
NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC. VS. TAN, it was held that:

Objections to taxpayers suit for lack of sufficient personality, standing, or interest are ,
however, in the main procedural matters. CONSIDERING THE IMPORTANCE OF THE CASES TO THE
PUBLIC, AND IN KEEPING WITH THE COURTS DUTY TO DETERMINE WHETHER OR NOT THE OTHER
BRANCHEDS OF GOVERNMENT HAVE KEPT THEMSELVES WITHIN THE LIMITS OF THE CONSTITUTION
AND THE LAWS AND THAT THEY HAVE NOT ABUSE THE DISCRETION GIVEN TO THEM, THE COURT
HAS BRUSHED ASIDE TECHNICALITIES OF PROCEDURE AND HAS TAKEN COGNIZANCE OF THESE
PETITIONS.

There is no disagreement on the part of the parties as to the far-reaching importance of the
validity of RA 8180. Thus, there is no good sense in being hyper-technical on the standing of the
petitioners for they pose issues which are significant to our people and which deserve our
forthright resolution.

3. It is contended that Section 5[b[ of RA 8180 on tariff differentials violates the


Constitutional prohibition 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, the Court has adopted a liberal
construction of the one titleone 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 a 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 providing for tariff differential is germane to the
subject of RA 8180 which is the deregulation of the downstream oil industry.

4. The contention that there is undue delegation of legislative power when it authorized
the President to determine when deregulation starts is without merit. The petitioners claim 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 and could not therefore provide the determinate or determinable standards which can
guide the President in his decision to fully deregulate the oil industry. The power of Congress to
delegate the execution of laws has long been settled by this Court in 1916 in the case of
COMPANIA GENERAL DE TABACOS DE FILIPINA VS. THE BOARD OF PUBLIC UTILITY COMMISSIONERS
WHERE IT WAS 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.

wo 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 EASTERM SHIPPING LINES VS. POEA, 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 sufficiency of 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 do is enforce it. Under the sufficient standard test,
there must be adequate guidelines or limitations in the law to map out the boundaries of the
delegates 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
because such has become an inevitability in light of the increasing complexity of the task of
government. In fact, in HIRABAYASHI VS. UNITED STATES, the Supreme Court through Justice
ISAGANI CRUZ held that even if the law does not expressly pinpoint the standard, THE COURTS
WILL BEND BACKWARD TO LOCATE THE SAME ELSEWHERE IN ORDER TO SPARE THE STATUTE; IF IT
CAN, FROM CONSTITUTIONAL INFIRMITY.

5. EO No. 392 failed to follow faithfully the standards set by RA 8180 when it considered
the extraneous factor of depletion of the OPSF Fund. The misapplication of this extra factor
cannot be justified. The executive is bereft of any right to alter either by addition or subtraction
the standards set by RA 8180 for it has no power to make laws. To cede to the executive the
power to make laws would invite tyranny and to transgress the 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 the agency.

6. Section 19 of Article XII of the Constitution provides:

The state shall regulate or prohibit monopolies when the public interests 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 of the exclusive right or power to carry on a particular business or trade, manufacture
a particular article or control the sale or the whole market structure in which one or only a few
firms dominate the total sales of a product or service. On the other hand, a combination in
restraint of trade is an agreement or understanding between two or more persons, in the form of
contract, trust, pool, holding company, for the purpose of unduly restricting competition,
monopolizing trade and commerce in a certain commodity, controlling its production, distribution
and price or otherwise interfering with freedom of trade without statutory authority. Combination
in restraint of trade refers to means while monopoly refers to the end.

Respondents aver 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 claim that the prohibition
against predatory pricing is intended to protect prospective entrants.

The validity of the assailed provisions of RA 8180 has to be decided in the light of the letter and
spirit of Section 19, Art. XII of the Constitution. 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. This distinct free enterprise system is dictated by
the need to achieve the goals of our national economy as defined under Section 1, Art. XII of the
Constitution which are: more equitable distribution of opportunities, income and wealth; a
sustained increase in the amount of goods and services produced by the nation for all, especially
the underprivileged. It also calls for the State to protect Filipino enterprises against unfair and
trades practices.

The provisions on 4% tariff differential, predatory pricing and inventory requirement blocks the
entry of other players and give undue advantage to the 3 oil companies resulting to monopolies or
unfair competition. This is so because it would take billions for new players to construct
refineries, and to have big inventories. This would effectively prevent new players.

In the case at bar, it cannot be denied that our oil industry is operated and controlled by an
oligopoly (dominated by a handful of players) and a foreign oligopoly at that. As the dominant
players, SHELL, CALTEX & PETRON boast of existing refineries of various capacities. The tariff
differential of 4% works to their immense advantage. Yet, this is only one edge on tariff
differential. THE OTHER EDGE CUTS AND CUTS DEEP IN THE HEART OF THEIR COMPETITORS. IT
ERECTS HIGH BARRIERS TO NE PLAYERS. New players in order to equalize must build their
refineries worth billions of pesos. Those without refineries had to compete with a higher cost of
4%.They will be competing on an uneven field.

The provision on inventory widens the advantage of PETRON, SHELL AND CALTEX against
prospective new players. The three (3) could easily comply with the inventory requirement in view
of their numerous storage facilities. Prospective competitors again find compliance oft his
requirement difficult because of prohibitive cost in constructing new storage facilities. The net
effect would be to effectively prohibit the entrance of new players.

Now comes the prohibition on predatory pricing or 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
the competitors. According to HOVENKAMP:

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.

Coupled with the 4% tariff differential and the inventory requirement, the predatory pricing is a
significant barrier which discourage new players to enter the oil market thereby promoting unfair
competition, monopoly and restraint of trade which are prohibited by the Constitution.

Reference:
Constitutional Law Reviewer by Atty. Larry D. Gacayan (2008)
College of Law
University of the Cordilleras
________________________

2-d.LACSON VS. SANDIGANBAYAN, January 20, 1999

3. Taxicab Operators vs. BOT, September 30,l982

4. Bautista vs. Juinio,127 SCRA 329

5. Dumlao vs. COMELEC, 95 SCRA 392

6. Villegas vs. Hiu, 86 SCRA 270

7. Ceniza vs. COMELEC, 95 SCRA 763

8. UNIDO vs. COMELEC, 104 SCRA 38

9. Nunez vs. Sandiganbayan, 111 SCRA 433(Read also the dissenting opinion of Justice Makasiar

10. Sison vs. Ancheta, 130 SCRA 654

11. Citizens Surety vs. Puno, 119 SCRA 216

12. Peralta vs. COMELEC, 82 SCRA 30


13. Hawaiian-Phil. Co. vs. Asociacion, 151 SCRA 306

14. Ormoc Sugar Co. vs. Ormoc City, 22 SCRA 603

15. Flores vs. COMELEC, 184 SCRA 484

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