G.R. No. 124360 , December 3, 1997
FRANCISCO S. TATAD, petitioner, vs. THE SECRETARY OF THE DEPARTMENT OF ENERGY AND THE SECRETARY OF THE DEPARTMENT OF FINANCE, respondents. [Consolidated with G.R. No. 127867: 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. EASTERN PETROLEUM CORP., SEAOIL PETROLEUM CORP., SUBIC BAY DISTRIBUTION, INC., TWA, INC., and DUBPHIL GAS, Movants-in-Intervention.]

FACTS

This is a Resolution resolving motions for reconsideration of the Court’s prior Decision. The original petitions challenged the constitutionality of Republic Act No. 8180 , the “Downstream Oil Industry Deregulation Act of 1996.” The Court had declared R.A. No. 8180 unconstitutional in its entirety. The public respondents (government officials) and some petitioners and intervenors (including new oil industry players) filed motions for reconsideration. The public respondents argued that Executive Order No. 392, which implemented the law by setting the date for full deregulation, was valid; that the specific assailed provisions (Sections 5(b) on tariff differential, 6 on minimum inventory, and 9(b) on predatory pricing) did not contravene the constitutional command against monopolies; and that the nullity of these sections did not render the entire law void. The intervenors (new oil players) and petitioner Enrique Garcia argued in their partial motions that the total nullification of the law would restore the disproportionate advantage of the three big oil companies (Caltex, Shell, Petron) and disarm new entrants, removing barriers to monopolistic practices. They prayed that only the specific provisions on tariff differential, predatory pricing, and minimum inventory be struck down.

ISSUE

The primary issue for resolution is whether the motions for reconsideration and partial motion for reconsideration, which seek to reverse the Court’s declaration of the unconstitutionality of R.A. No. 8180 in toto, have merit.

RULING

The Court DENIED the motions for reconsideration and partial motion for reconsideration, finding no merit in them. The Court held:
1. On the misapplication of R.A. No. 8180 : The Court rejected the public respondents’ argument that the Executive could add to the standards set by Congress in the law. The standard for exercising delegated power is part of lawmaking and lies exclusively with Congress; the Executive cannot modify the legislative will.
2. On the constitutionality of specific provisions:
* Tariff Differential (Sec. 5(b)): The 4% tariff differential between crude oil and refined petroleum products was reaffirmed as a substantial barrier to entry for new players, giving a decisive advantage to the three existing oil companies. The Court noted that Senate hearings established it gave a 20-centavo per liter advantage and that the intervenors (new players) themselves considered it oppressive and supported its nullification.
* Minimum Inventory Requirement (Sec. 6): The requirement was reaffirmed as a prohibitive cost burden on new players, inhibiting their operation. The intervenors implicitly confirmed its inhibiting effect.
* Predatory Pricing (Sec. 9(b)): The provision was reaffirmed as constitutionally infirm. Given the law’s other anti-competitive provisions, this loosely defined prohibition could be wielded more successfully by the dominant oil oligopolists and lacked deterrent strength. The Court noted that even one of the law’s authors proposed to tighten its definition.
3. On the review of economic policy: The Court rejected the contention that it was reviewing the wisdom of the law. It clarified that its task was to review the constitutionality of the law, specifically whether it contravened the constitutional command to prevent monopolies and promote competition.
4. On the total nullification of the law: The Court sustained its ruling that the unconstitutional provisions (tariff differential, inventory requirement, predatory pricing) were the principal tools to achieve the law’s objective of fair competition. Their removal would leave a law without its essential safeguards, defeating its purpose. Therefore, the entire law was void.
5. On the effect of nullification: The Court noted that the reversion to the previous 10% tariff differential under the Tariff Code was a consequence of the law’s nullification. It also observed that Congress was already working on new legislation to address the defects.