Cartel: Aided by regulators?

Not long ago, amid the rise in the prices of basic commodities, some sectors, probably, out of frustration, have filed a petition for “the government to impose price ceilings on rice, garlic and other basic and prime commodities”. Rightly so, because granting everything is above board, market prices are consequences of the interplay between supply and demand. So that, when supply is higher, prices will go down. Inversely, when demand is way up, prices will go up as well. As it was, three months ago, there was supply and demand regularity and, yet, prices went up.

Yes, it was true that we had potential shortfalls in domestic rice production in the months of June and July. Allegedly however, the government was fully prepared for the “expected shortfall during the lean months of June and July”. Thus, reportedly, through the National Food Authority, the “country imported 800,000 metric tons of rice”. Moreover, we have had shortages in local garlic production. The fact is, we import 73% of our garlic requirements. True enough, through the Department of Agriculture, importation of garlic was authorized to cover such shortage. Therefore, such importations should have stabilized the supply and demand equilibrium of both commodities.

Thus, given these scenarios, price manipulation is possible. So that, about two months ago, PNoy appropriately “ordered the Department of Justice, through the National Bureau of Investigation, to look into reported hoarding, profiteering and cartel-like activities”. These are malpractices that were so prevalent in the past and so pervasive in times of calamities.

Section 5 of Republic Act No. 7581, otherwise referred to as the "Price Act", is so explicit as far as these “illegal acts of price manipulation” is concerned. It considers unlawful, such acts as, hoarding (which is the undue accumulation by a person or combination of persons of any basic commodity beyond his or their normal inventory levels or the unreasonable limitation); profiteering (which is the sale or offering for sale of any basic necessity or prime commodity at a price grossly in excess of its true worth); andcartel (which is an agreement between two or more persons to artificially and unreasonably increase or manipulate its price).

Of the aforementioned malpractices, hoarding and profiteering can be easily done through ocular inspection and surveillances. Cartel is quite difficult. However, knowing fully well that the same DOJ (through the NBI) is in its fold the Office for Competition, then, any cartel-like practices can be effectively investigated. To recall, the Office for Competition (created through Executive Order No. 45, series of 2011) was established to, among others, investigate all cases involving violations of competition laws; enforce competition policies and laws to protect consumers from abusive, fraudulent, or harmful corrupt business practices; and supervise competition in markets by ensuring that prohibitions and requirements of competition laws are adhered to. Obviously, therefore, if DOJ renders its task honestly and effectively, cartel-like practices can be easily detected.

Today, the verdict is out. It was not, after all, “a shortage in stocks but collusion between government officials and traders in the garlic industry that caused the staggering increase in garlic prices”, revealed the Department of Justice. The main reason, according to DOJ Sec. Leila de Lima, “the majority of permits (to import) were only granted to one group of garlic traders”. Ridiculously, by just “at least four individuals” but done through a bunch of “dummy entities accredited by the Department of Agriculture’s Bureau of Plant Industry”. Thus, obviously, the group is colluding to dictate prices.

Worst, it is very apparent that some Bureau of Plant Industry personnel are largely involved in this malpractice. This is quite sad. Remember, a few unscrupulous businessmen forming a cartel is already tough and hard to establish and prosecute. When our government regulators take part in it, the cartel and its malpractices could be perfectly shielded.

Indeed, our law, as far as cartel prevention is concerned, is broadly complete. It is just that, as the DOJ investigation revealed, some unscrupulous businessmen in collusion with some government personnel, are just toying with it and have unduly taken advantage of the general public’s helplessness. So that, even if we have to bring the law to perfection, there is no assurance that malpractices (like cartel, etc.) may no longer exist. Truth to tell, we are known all over the globe as friendly and hospitable. Though such trait is admirable, its downside, however, is inexplicably outrageous. Our yielding nature has been a thorn as we give in so easily even to the most unethical proposition. Such submissive attitude is more often abused by people who are too selfish and too wanting to rule, dictate and dominate. Sadly, these are characteristics that happen to be requisites for a cartel or any unethical/illegal practices to flourish.