Fair competition

AFTER MORE than two decades, consumers can now look forward to the benefits of fair competition—better products and services at the right prices. The 16th Congress approved early this month a consolidated version of a national competition policy first filed in the 8th Congress more than 20 years ago. President Aquino is expected to sign the bill before he delivers his State of the Nation Address next month.

The proposed Philippine Competition Act is an antitrust policy prohibiting anticompetitive arrangements or behavior as well as other unfair business practices. Lawmakers expect the landmark measure to result in stronger measures to protect consumer rights and welfare against the inefficiencies and abuses of the market. The business community believes that the proposed competition law, which is expected to check anticompetitive business practices, abuse of market power and anticompetitive mergers, will lead to a more open environment for investments, innovation and pricing. It can likewise level the playing field for new entrants and existing investors planning to expand or diversify their investments in the local market.

An important provision of the bill is the creation of the Philippine Competition Commission (PCC), a powerful independent quasijudicial body attached to the Office of the President, to implement the national competition policy. It will be made up of a chair and four commissioners with a seven-year term. The commission has the power to conduct an inquiry, investigate and hear and decide on cases involving any violation of the Competition Act and other existing competition laws and prescribe the appropriate civil or criminal penalties. The proposed measure also stipulates a fine of up to P100 million for business entities found engaging in unfair business practices for the first offense and up to P250 million for the second offense. For criminal charges, offenders face imprisonment of two to seven years in addition to the fines.

The bill prohibits anticompetitive arrangements between or among competitors (an example is through collusion to fix the price of their product or service) and abuse of dominant position for monopolies or companies that have very negligible competition. Dominant players, under the law, are those with a market share of at least 50 percent. An example of abuse of dominant position is predatory pricing (the selling of goods or services below cost in an effort to force the competition out of the market) or imposition of barriers to prevent the entry of new players in the market.

The passage of a national competition policy has long been pushed by business groups to do away with monopolistic commercial behavior and level the playing field for businesses. Before the bill was ratified by the current Congress, intense lobbying by big business opposed to the entry of competitors in the local market made sure that all competition and antitrust bills languished at the House and Senate committee levels or passed as watered-down versions of the original. An example was the liberalization under the Ramos administration. The banking industry was opened up to help bring down the cost of borrowed funds, but the law restricted the entry of foreign banks to only 10. The telecom sector was also liberalized to break the monopoly of PLDT, but the entry of new players did not bring down costs as much due to ownership restrictions. Worse, the regulatory agency for the telecom sector often sided with the telecom firms.

The move to level the playing field and ensure fair competition does not stop here. The next step should be the removal of constitutional restrictions to competition.

Patronage politics has ensured the protection of the business interests of favored individuals from competition. This protection goes all the way to the Constitution, which contains provisions restricting the entry of foreign investors in certain industries.

Congress should now strike out provisions in the Constitution that have withheld from consumers the benefit of such services as affordable world-class air or sea travel or telecommunications because of barriers to the entry of competitors with more efficient processes and lower costs. Or of cheaper prices for essential products because production has been limited by law to a privileged few who wouldn’t mind upgrading to become more efficient because there are no competitors, anyway.