Formulating competition policy and law

One does not have to be a leftist to make the observation that the Philippine economy is still in the clutches of a privileged few who, through monopolistic or oligopolistic practices, are able to concentrate wealth and income in their hands and to set prices of basic goods and services unreasonably high. The Philippines still ranks low in global competitiveness because of, among other reasons, the persistent weak perception on the effectiveness of our country's anti-monopolicy policy among ASEAN countries. Although the criminal code of the Philippines includes antitrust activities among those acts punishable by imprisonment, no one has ever gone to jail for restraining competition. It is about time we are gifted by our Legislature with an effective competition policy and law. It is my hope that before the term of the present Administration ends, HB 4090 or some variant, will be passed into law, especially now that the people in Congress will no longer be distracted by the "extra-curricular activities" occasioned by the notorious pork barrel system.

Although there are numerous bills in both the chambers, I am especially impressed by HB 4090 for its comprehensiveness. As a long-time student of industrial structures, having studied under Harvard professors who were expert scholars of monopoly, oligopoly, and monopolistic competition, I find the provisions of HB 4090 fully complying with the dictum that anti-competitive behavior among firms, such as price fixing and bid rigging, should be penalized, and not the relative size of the firm within its relevant market per se. In fact, more than 40 years ago, I already issued an opinion during the Marcos regime that even while San Miguel Corporation was the only manufacturer and seller of beer at that time, there was no sign of monopolistic practices because there was freedom of entry, and beer has numerous substitutes as an alcoholic beverage.

According to HB 4090, "it shall be unlawful for an entity, in collusion with another entity or other entities, to enter in any agreement or conduct which has the object or effect of unreasonably restricting competition substantially. The agreement or conduct prohibited by this Act includes but is not limited to the following:

a. any agreement or conduct among competitors to restrict competition as to price or other terms of trade;

b. any agreement or conduct among competitors to set, limit, or control production, markets, technical development, or investment;

c. any agreement or conduct among competitors to divide or share the market, whether by volume of sales or purchases, territory, type of goods or services, buyers or sellers or any other means;

d. any agreement or conduct among competitors to fix price at an auction or in any form of bidding including cover bidding, bid suppression, bid rotation and market allocation and other analogous practices of bid manipulation; or

e. any agreement or conduct among competitors to apply dissimilar conditions to equivalent transaction with other parties, thereby placing them at a competitive disadvantage, except where reasonably necessary to create a new product, share risk, integrate productive activity, set legitimate technical standards, or otherwise achieve efficiencies likely to enhance competition, productivity and consumer welfare.

Among the various bills on competition policy, HB 4090 provides the most concise list illustrating market behavior that is likely to prevent or restrict competition. It also provides that there is a rebuttable presumption of dominance if an entity controls at least 50% of the relevant market. It says further that the Competition Authority shall consider the structure of the market, degree of integration, technological and financial advantages and other relevant factors in determining the control of market. This assumes that the Competition Authority will have access to experts on microeconomics, especially industrial economics, who can analyze market structures and behavior. HB 4090 is so comprehensive that it also includes certain refinements not found in the other proposed bills. For example, price differentials for the same goods or services are not considered anti- competitive if they are motivated by socialized pricing for the less fortunate sector of the economy; or if they reasonably or approximately reflect differences in the cost of manufacture, sale, or delivery resulting from differing methods or quantities in which the goods or services are sold or delivered; of if they are in response to the competitive price of payments, services or change in the facilities furnished by a competitor; or if they are in response to changing market conditions, marketability of goods or services, or volume.

Finally, HB 4090 bypasses the jurisdiction of Regional Trial Courts over civil and criminal cases on violations of competition law by creating a separate Competition Commission equivalent to the Court of Appeals. In my opinion, this Competition Commission should not be under the Department of Justice, as it is now. Global best practice shows that competition regulatory agencies with operational autonomy or administrative independence from the executive branch are more effective in the performance of their functions. For comments, my email address is bernardo.villegas@uap.asia..