Cement cartel?

A year ago, a former official of the Department of Trade and Industry filed a complaint at the Philippine Competition Commission (PCC) against an alleged cartel in the cement industry. Last March, the PCC said it would proceed with a full-blast investigation of the allegations of anticompetitive behavior made by former trade undersecretary Victorio Dimagiba, currently the president of the consumer advocacy group Laban Konsyumer Inc.

The PCC said that during its preliminary inquiry, it found reasonable grounds to conduct a full administrative investigation of the cement industry for possible violations of Sections 14 and 15 of the Philippine Competition Act.

Section 14 on “Anti-competitive Agreements” prohibits agreements between or among competitors that will restrict price competition, fix prices, set or control production, divide or share the market, and other agreements that will substantially prevent, restrict, or lessen competition.

Section 15 on “Abuse of Dominant Position” prohibits one or more entities from abusing their dominant position by engaging in conduct that will substantially prevent, restrict, or lessen competition. These activities include selling goods or services below cost; imposing barriers to entry; and setting prices or conditions that discriminate unreasonably between customers or sellers of the same goods or services, among others.

In his affidavit-complaint, Dimagiba argued that the Cement Manufacturers Association of the Philippines (Cemap), LafargeHolcim Philippines Inc. and Republic Cement violated the provisions of the competition law by engaging in anticompetitive agreements.

Among his allegations, Dimagiba pointed out that Cemap filed unsubstantiated and frivolous cases solely against non-Cemap imported brands, claiming that these were substandard cement; it widely circulated in the media and other forums misleading and unsupported information that current oversupply and low demand in other Asean countries risked flooding the Philippines with substandard cement; it maintained prices of domestic cement in the retail market unreasonably high, opening independent importers to suits on predatory pricing; it widely circulated unverified reports inferring that independent importers of cement are technical smugglers; and it sought to embed in the DTI the interests of Cemap to ensure continuing protection of its principals’ interests.

Dimagiba urged the PCC to release its findings now as it has been a year since he filed his complaint. And here comes the sad part. While the creation of the PCC was indeed a major step in consumer protection, it will apparently take a long time before its inquiry into the cement industry is completed. The PCC expects to wrap up its investigation on the alleged violations involving anticompetitive practices in two years. According to PCC Commissioner Stella Quimbo, the antitrust agency benchmarks its full probe on an average span of two years. She explained that the investigation would take time as it involved a rather holistic approach in analyzing the case; she cited the need to first understand how the industry works in order to conduct the inquiry.

This is quite understandable. However, if the PCC’s reason for the long time it would take to complete its probe is that it is simply understaffed, then it would be wise to embark on an aggressive hiring program to speed up its investigations. Out of 26 queries and complaints received by the PCC so far, only three have progressed to full-blown investigations, one of which is the case involving the cement industry.

The penalties for violation of the provisions of the competition law are not puny. Violations of the specific provisions against the cement industry carry a fine of P100 million on the first offense and not more than P250 million on the second offense. Surely it would be better if the investigation takes faster than two years.