SC affirms validity of profiteering penalty under Price Act

MANILA, Philippines — The Supreme Court (SC) has upheld the constitutionality of the provision of Republic Act 7581, or the Price Act, that penalizes profiteering.

In a 24-page decision penned by Associate Justice Marvic Leonen, the SC denied the petition of Universal Robina Corp. (URC) that sought to reverse the denial of its petition for declaratory relief on April 3, 2012.

The URC had asked the regional trial court to declare the provision in the Price Act prohibiting profiteering invalid, arguing that the definition of profiteering is void for vagueness and violates the constitutional right of an accused to be informed of the nature and cause of an accusation against them.

It also sought to nullify Executive Order 913 and Rule IX, Section 5 of the Department of Trade and Industry (DTI) Administrative Order No. 7, as well as all issuances, acts or proceedings based on these issuances, for being an invalid exercise of quasi-legislative power and violating due processes.

The regional trial court, however, denied the petition for being prematurely filed and failing to prove the invalidity of the laws and executive issuances it assailed.

This prompted URC to bring the case to the SC, arguing that there is an actual legal controversy that calls for judicial review, since the case was dismissed due to a technicality and the legal controversy created by the DTI’s acts was not resolved by any competent authority.

The URC said it had the right to challenge the constitutionality of Section 5(2) of the Price Act, as it was applied when the DTI initiated the complaint against the company.

The company also claimed that profiteering, which is defined as “the sale or offering for sale of any basic necessity or prime commodity at a price grossly in excess of its true worth” is void for vagueness.

It added that no standards and guidelines were also provided to determine a commodity’s “true worth” or a price in excess of it.

Thus, it stressed that persons selling basic necessities or prime commodities may be threatened with a penalty under this provision, without them realizing that they are profiteering.

The URC also argued that EO 913 and Rule IX, Section 5 of the DTI order are invalid exercises of quasi-legislative power, saying that the Consumer Act and the Price Act do not grant the agency the power to issue injunctive relief motu proprio, without notice and hearing, and without limit as to the duration of effectivity.

In denying URC’s petition, the SC said the company failed to establish that the provision on profiteering is void for vagueness.

“Petitioner has not shown that the law enforcers have unbridled discretion to determine that profiteering has been committed. Neither has it established that it did not have fair notice of the conduct to be avoided,” the decision stated.

It added that although the Price Act does not define the terms “true worth” or “price grossly in excess” of true worth, the country’s laws recognize that “a reasonable price is a question of fact that can be determined based on the circumstances.”

The SC said that it is reasonable for the government to closely monitor the prices of basic necessities and prime commodities, adding that constant increase in the prices of basic necessities impedes the ability of the poor to create the demand for the products that they need.

In turn, the poor end up paying more for the same quantity of basic necessities and their disposable income diminishes.

“Additional goods that they need, they cannot afford. As a result, they opt out of that market entirely. On the other hand, alternatives for the middle- and higher-income classes become more attractive to producers and entrepreneurs. Luxury goods demanded by the rich, such as perfumes and cars, will still be attractive,” the SC said.

If this is allowed to continue unregulated, the economy would “produce goods and services mostly for middle- and high-income classes, making life difficult for the poor,” according to the high court.

The case stemmed from a letter from the Bureau of Trade Regulation and Consumer Protection director Victorino Dimagiba to URC in May 2010, asking the company why its ex-mill flour prices had not been reduced despite the decrease in certain cost factors.

In response, the URC said the difference in the price of their flour bag within a span of three years “reflects the price movement of wheat in the world market and covers our other costs of operation, which involve increases in our labor costs.”

Dimagiba, however, told URC that the prices in the international market from January 2007 to September 2007 and from January 2010 to May 2010 were almost the same despite the retail and ex-mill prices in 2007 being lower than the prices in 2010.

He then instructed the firm to reduce its ex-mill prices to P630 to P680 per bag of flour.

Dimagiba eventually filed a complaint before the DTI against URC and other local flour millers for profiteering under the Price Act.

In June 2010, before the hearing on the profiteering charge, URC said it received a copy of a preliminary order issued by the DTI adjudication officer to reduce the selling price of flour from the P770-P790 range down to the P630-P680 range while the case was pending.

URC was also required to explain why the preliminary order should be revoked.

The preliminary order was lifted after the Philippine Association of Flour Millers declared to the DTI that it had lowered its flour prices.