THE Supreme Court has affirmed the constitutionality of the provision penalizing profiteering under Republic Act No. 7581 or The Price Act.
In a 24-page decision penned by Associate Justice Marvic Leonen, the Court en banc denied the petition of Gokongwei-owned Universal Robina Corporation (URC) seeking the reversal of the April 3, 2012 trial court decision denying its petition for declaratory relief for failing to prove the invalidity of the laws and executive issuances it assails and for being premature.
The URC petition for declaratory relief filed before the lower court prayed that the provision in the Price Act prohibiting profiteering be declared invalid.
It argued 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 No. 913 and Rule IX, Section 5 of the Department of Trade and industry (DTI) Administrative Order No. 07 for being an invalid exercise of quasi-legislative power and violating due process and all issuances, acts, or proceedings based on these issuances.
However, the trial court dismissed the petition for declaratory relief on the ground of lack of justiciable controversy and being prematurely filed. This prompted URC to file a petition for review before the SC seeking the reversal of the trial court’s decision.
It argued that there is an actual legal controversy that calls for judicial review and that the dismissal of the profiteering case against “the local flour millers does not negate the existence of a conflict of legal right.”
As the profiteering case was dismissed due to a technicality, petitioner insisted that the legal controversy created by the DTI’s acts was not resolved by any competent authority, and therefore, remains an actual legal controversy.
The URC insisted that 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 it.
It claimed that the definition of profiteering under the Price Act — “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.
No standards and guidelines were provided to determine a commodity’s “true worth,” or a price grossly in excess of it, URC asserted.
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.
Petitioner noted that penalizing profiteering without sufficiently defining what constitutes it violates one’s right to due process and the accused’s right to be informed of the nature and cause of an accusation against him.
It also argued that EO No. 913 and Rule IX, Section 5 of DTI Administrative Order No. 07, containing rules on the agency’s issuance of preliminary orders, are invalid exercises of quasi-legislative power.
URC pointed out that the Consumer Act and the Price Act do not grant the DTI the power to issue injunctive relief motu proprio, without notice and hearing, and without limit as to the duration of effectivity
In ruling against URC, the Court held that 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 Court said.
While the The Price Act does not define the terms “true worth” or “price grossly in excess” of true worth, the SC said our laws recognize that a reasonable price “is a question of fact that can be determined based on the circumstances.”
Petitioner, SC said, “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.”
In explaining the rationale for prohibiting profiteering, the SC said the constant increase in the prices of basic necessities impedes the ability of the poor to create the demand for the products they need.
“With a price increase, they 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,” the SC said.
“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 added.
The SC warned that if this is allowed to continue unregulated, “our economy will produce goods and services mostly for middle- and high-income classes, making life difficult for the poor.”
Considering this, the court declared, “it is reasonable for the government to closely monitor the prices of basic necessities and prime commodities.
This helps define productivity for the goods that matter, which, in turn, provides a better quality of life for all.”
The case stemmed from the letter sent by then director of the Bureau of Trade Regulation and Consumer Protection Victorino Dimagiba to URC on May 25, 2010, asking the latter why its ex-mill flour prices had not been reduced despite the decrease in certain cost factors, such as the price of wheat in the international market, freight cost, foreign exchange rate, and the imposition of zero tariff.
Dimagiba wrote similar letters to other local flour millers, including Delta Milling Industries, Inc., Morning Star Milling Corporation, Philippine Foremost Milling Corporation, San Miguel Mills, Inc., General Milling Corporation, Liberty Flour Mills, Inc., Philmico Foods Corporation, Philippine Flour Mills, Republic Flour Milling Corporation, and Wellington Flour Mills, inquiring about their flour prices.
URC responded that “the difference in the price of our 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, reminded Universal Robina that the wheat prices in the international market from January 2007 to September 2007 on one hand, and from January 2010 to May 2010 on the other, were almost the same despite the retail and ex-mill prices in 2007 being lower than the prices in 2010.
He thus instructed URC to reduce its ex-mill prices to P630.00 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.
On June 15, 2010, before the hearing on the profiteering charge , URC received a copy of a preliminary order issued by the DTI adjudication officer to reduce the selling price of flour from the P770 to P790 range down to the P630 to P680 range while the case was pending.
Universal Robina was also required to explain why the preliminary order should be revoked.
The preliminary order was soon lifted after the Philippine Association of Flour Millers declared to the DTI that it had lowered its flour prices.