PCC flags franchise contracts that dampen competition

THE Philippine Competition Commission (PCC) said some provisions of franchise contracts may be anti-competitive, including pricing restrictions and the imposition of geographic territories on franchise holders.

At a webinar organized by the Philippine Franchise Association (PFA), PCC Chairman Arsenio M. Balisacan said the industry faces “challenges” in sustaining a competitive environment.

“The franchising industry… requires balancing competition enforcement with maintaining contractual limitations that protect intellectual property rights and trade secrets of franchisors. For this reason, the PCC wants a proactive approach to ensure that the sector remains competitive as it grows,” he said.

He said franchisees are bound to follow a limited set of formats or supplies offered by the franchisor to remain in compliance with brand standards, though the pricing and geographical clauses in their contracts may not pass competition review.

“Franchising is a popular gateway for starting businesses and an established track of bringing in international brands to the country. As the antitrust regulator, the PCC recognizes PFA’s important role in ensuring that pro-competition practices are observed in the sector,” Mr. Balisacan added.

He said the challenge lies in enforcing Section 15(e) of Republic Act No. 10667 or the Philippine Competition Act, which forbids the imposition of restrictions on the contract for sale of goods or services, but deems franchising, licensing, merchandising, and distributorship agreements acceptable business practices.

“The PCC is strengthening competition awareness in the growing franchising sector as it sees the industry gaining popularity and fast becoming an important contributor to the Philippine economy,” it added. —