I Love The Philippine Competition Act!

In a business environment, having competition is healthy. I am all for it, not only as a consumer, but as a seller, too! I just think that having competition keeps you motivated to innovate and strive for the best. Competition is vital in any thriving economy because it promotes the entrepreneurial spirit, encourages private investments, facilitates technology development, and enhances productivity. It also hampers you from taking advantage of the market. There is this great temptation to do so if you are the only one giving that type of product or service.

Meeting with Sen. Bam Aquino

I met Sen. Bam Aquino recently and this is one of the bills that I was impressed to hear about.

 

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After three decades of waiting and 30 hours of bicameral conference hearing, Congress has finally ratified the Philippine Competition Act that penalizes bad market behavior and abuse of dominant positions. The Philippine Competition Act seeks to ensure that there will be fair competition among the market players in the economy. The law prohibits anti-competitive agreements, cartels, abuses of dominant positions, and mergers & acquisitions that prevent, limit, and restrict competition. This act seeks to achieve an efficient market economy and a level playing field for market players regardless of size and location.

“If enacted into law, the measure will create a level playing field, whether big or small, when it comes to market opportunities,” said Sen. Bam Aquino, chairman of the Senate Committee on Trade, Commerce and Entrepreneurship. For almost thirty years, the Philippines has remained one of few countries that does not have a valid competition policy that will protect its consumers and private industries. What goes with liberalization of our industry is a law to ensure that our market is efficiently working. This landmark measure pushes for an economy that is governed by clear rules of engagement between market players and their quest for their share in the market. This is a commitment of the Philippines in various trade organizations and this measures is seen to be the catalyst for a healthier trade, industry, and business as we compete in the bigger global market.

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“It has been one of the longest running bills in our history,” Sen. Bam said, as the first competition policy was filed in the 8th Congress. After World War II, Japan passed its Original Antimonopoly Law in 1947 while the United Kingdom passed its Monopolies and Restrictive Practices Act in 1948.Other ASEAN countries have also passed their respective competition laws, starting with Indonesia and Thailand in 1999, Singapore in 2004, Vietnam in 2005, and Malaysia in 2012.

“This is primary a huge victory for millions of consumers, who, in the end, will be the ultimate beneficiaries of this measure,” added Sen. Bam, whose Senate Bill No. 1027 or the Philippine Competition Act was among the measures consolidated under Senate Bill No. 2282.
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President Aquino is expected to sign the measure into law as it is one of his administration’s urgent measures.

Sen. Bam said the Philippine Competition Act is expected to eliminate cartels, and penalize anti-competitive agreements and abuses of dominant players in the markets that lead to high prices of goods and services. “In addition, the Philippine Competition Act promotes a culture of healthy competition that inspires ingenuity, creativity, and innovation in addressing market needs,” Sen. Bam said.

“We need more players in our markets, so that the quality of products and services increases, and prices of goods would then go down,” Sen. Bam added. The measure will also prohibit anti-competitive agreements and abuses of dominant position that distort, manipulate, or constrict the operations of markets in the Philippines.

“We thank the hard work of our fellow senators and our congress counterparts in coming up with a solid bill that will further help our economy down the road,” Sen. Bam emphasized.

Sen. Bam also credited the late Rep. Henry Cojuangco for actively pursuing the bill’s House version. Cojuangco died from aneurysm, hours before the bill hurdled the second reading at the House of Representatives last May 12.

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“Panalo ang taumbayan dahil sa pagpasa ng panukalang ito,” the senator highlighted.

“We would like to tell the world that with the Philippine Competition Act, our country is now open for business,” Sen. Bam happily declared.

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Some other Frequently Asked Questions:

Does this law disallow and dismantle monopolies?
No, this law does not prohibit the existence of monopolies. If a business is big because it employed an efficient, innovative, excellent customer service/goods, and competitive business practice, then they can keep their dominance. This law only looks at the behavior of market players that unduly prevent, restrict and lessen competition.

By allowing State intervention as to the conducting of business, will this law hinder the free trade?
No. In fact, the law protects free and fair trade by deterring unscrupulous entities that seek to unfairly dominate and manipulate the market. This measure, in fact, creates an environment where market players are protected with clear rules so they can compete in the market regardless of their size, location and duration of stay in the market. In effect, the measure protects new entrants and businesses, which are playing a fair game in the market.

Which entities does the said law cover?
This law is enforceable against any person or entity engaged in trade or business in the Philippines. It also applies to international trade that have direct and substantial effects in the Philippines.

Are there any exceptions to such coverage?
No industry is exempted from the application of this measure.

Who will implement the provisions of this law? Or will this be another unimplemented piece of legislation?
A quasi-judicial body will be created to fully implement this measure. The Philippine Competition Commission (PCC) is established to look into anticompetitive behaviors, abuses in dominant positions, and anticompetitive mergers and acquisitions.

Who will compose the Philippine Competition Commission?
The PCC shall be composed of a Chairperson and 4 Commissioners, as well as an Executive Director and other personnel to be determined by the Commission.

What are the powers of the Philippine Competition Commission?
The PCC shall have the power to implement the provisions of this law, such as conducting investigations on any violations of the law, reviewing mergers and acquisitions, applying preventive and punitive measures against violators of the law after due notice and hearing, inspecting business premises upon order of the court, issuing subpoenas and citing persons in contempt, issuing adjustment or divestiture orders, and conducting, publishing, and disseminating studies and reports on matters relating to fair competition, among many others.

Who will prosecute criminal offenses under this law?
The DOJ-OFC (Department of Justice– Office for Competition) is responsible as to the conduct of preliminary investigations and prosecution of all criminal offenses under this law. The PCC and the DOJ-OFC will work closely together to ensure that no anti-competitive act is unpunished. What acts are prohibited under this law? There are 3 things that are prohibited under this Act: Anti-competitive Agreements, Abuses in Dominant Position and Anticompetitive Mergers and Acquisitions.

When is an agreement deemed to be anti-competitive?
For agreements between and among competitors that restrict competition as to price manipulation and bid rigging are per se prohibited and are considered criminal under this Act. Other agreements that prevent, restrict, and lessen competition are assessed based on its object or effect in the market before it can be considered as anti-competitive.

When is there an abuse of dominant position?
For entities who are dominant in a relevant market, such behaviors that prevent, restrict and lessen competition are considered anti-competitive: selling goods and services below cost, imposing barriers to entry, making the sale of goods dependent on other goods or services which are totally unrelated, making prices discriminatory to the distributor and the consumers, directly or indirectly imposing conditions to a sale, and limiting production to increase prices in the market.

Are we punishing big businesses?
No. Having a dominant position in a relevant market through legitimate means that do not substantially prevent or lessen competition is not prohibited. Any conduct that contributes to the improvement of production and technical development and is beneficial to consumers may not necessarily be an abuse of dominant position.

Are all mergers and acquisitions considered anti-competitive?
No. Mergers and acquisitions that do not prevent, restrict or lessen competition are still allowed in the current measure. However, mergers and acquisitions that hit the notification threshold will be asked to notify the Commission before their transaction is consummated. This is to ensure that the impact of such merger or acquisition is not detrimental to the market.

What are the examples of allowed mergers and acquisitions?
Mergers and acquisition that has brought about or is likely to bring about efficiency is allowed. Also, parties to a merger or acquisition faced with actual or imminent financial failure are also allowed. In addition, an entity is allowed to continue owning and holding stock or other share capital or assets of another corporation which it acquired prior to the approval of the law.

What are the fines and penalties to be imposed on violators of the law?
For anti-competitive agreements and abuse of dominant position, an administrative penalty, determined after due notice and hearing, reaches up to a hundred million pesos for the first offense, while a fine of not less than a hundred million pesos but not more than two hundred fifty million pesos is imposed for the second offense.

For anti-competitive agreements done between and among competitors, violators will face imprisonment from two (2) to seven (7) years, and a fine of not less than fifty million pesos but not more than two hundred fifty million pesos. The penalty of imprisonment shall be imposed upon responsible officers and directors of the entity.

But will important trade secrets of businesses be protected under this law?
Yes. Confidential business information in relation to any inquiry or investigation conducted pursuant to this law shall not be directly or indirectly disclosed, published, or disseminated. However, this confidentiality rule shall not apply when the entity consents to the disclosure or the business information is mandatorily required to be disclosed by law or by a valid order of a court or government agency.

What are the mechanisms in place to ensure the efficient implementation of this measure?
As we learned from the experiences of other nations, cartels and other anti-competitive behaviors are really hard to prosecute. They work in the most innocuous ways that normally go undetected by the naked eye.

As a global best practice, the law calls for the development of a Leniency Program to be granted to any entity in the form of immunity from suit or reduction of any fine in exchange for the voluntary disclosure of information, which would help in the prosecution of cases under this law. This has been proven to work in other jurisdiction like in UK and US.

When should the cases be filed under this law?
Any action arising from a violation of this law should be commenced within five (5) years from the discovery of the violation, as to criminal actions, and from the time the cause of action accrues, as to administrative and civil actions. Is there still time for entities to renegotiate agreements and restructure their businesses so as not to violate the law? Administrative, civil, and criminal penalties shall be imposed on violators of the law only upon the expiration of two (2) years after the effectivity of the law. This rule, however, will not apply as to administrative, civil, or criminal proceedings initiated before the entry into force of this law.

I love the Philippine Competition Act. Let’s help Sen. Bam Aquino spread the word about this! Please use #PHCompetitionAct 🙂

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