Is it antitrust-worthy?

Since President Aquino mentioned a new antitrust law in his first State of the Nation Address, much work has been done on the antitrust bills filed in Congress.

Legislative hearings have been concluded and proponents say that after decades of waiting (since the Eighth Congress, I’m told), we will finally have a unified, up-to-date and comprehensive antitrust or competition law.

What are antitrust laws? Antitrust or competition laws are laws that regulate and maintain market competition by prohibiting or regulating anti-competitive behavior. Three acts that antitrust laws normally seek to prohibit are monopolies, cartel-like behavior and abuse of dominant market position.

In an economic sense, antitrust laws are in place to promote a freer market and more open trade, which will result in substantial efficiency and welfare gains for everyone.

A hot topic

The proposed acquisition of Digitel by PLDT has sparked even more interest on an antitrust law for the country. Globe, a competitor, argues that the transaction will lead to PLDT controlling close to 70 percent of the market and will eventually lead to higher prices and rates. However, PLDT and Digitel maintain that the deal will result in continued “unli” benefits, to use telco lingo, for consumers.

Aside from the PLDT-Digitel deal, Nestlé has its own antitrust controversy: Allegedly, it has been engaging in predatory pricing to drive out competition from the market. Expectedly, Nestlé contends that its products are not the cheapest in the market and that competition among lower-priced products remains intense.

Justice Secretary Leila de Lima also had reportedly ordered a review of antitrust cases filed against Fraport AG (Fraport), a German company, and its local partner Philippine International Air Terminals Co. (Piatco), in connection with the Ninoy Aquino International Airport Terminal 3.

Interestingly, perhaps in an attempt to respond to these antitrust controversies, the President issued Executive Order No. 45, which created an Office of the Competition Authority in the Department of Justice, to help enforce our antitrust laws.

Current law

This is not to say that our country has no antitrust laws at all. From myriad sources of law, one can find snippets of an anti-competition framework that serves as some sort of precedent for the current bill.

Foremost is Article XII, Section 19, of the Constitution, which mandates the State to regulate or prohibit monopolies when required by public interest and at all times to prohibit combinations in restraint of trade and other unfair competition practices.

There are implementing pieces of legislation, like the Revised Penal Code which, in Article 186, punishes monopolies and combinations in restraint of trade.

Meanwhile, the Civil Code under Article 28 authorizes the collection of damages arising from unfair competition in agricultural, industrial or commercial enterprises or in labor.

There are other laws that attempt to penalize anti-competition activities. However, with very few exceptions, many of these laws have but skeletal provisions and do not provide meaningful guidance to the market on how our competition policy should be implemented.

Salient features

What is clear from the bills (at least after the Senate and House committee hearings) is that they do not prohibit monopolies per se, perhaps taking their cue from the Constitution and our Asean neighbors.

At the core of the bills are more detailed provisions on anti-competitive agreements (like price-fixing, market allocation), abuse of dominant position (like predatory pricing), anti-competitive mergers and more detailed enforcement mechanism.

Unlike its Senate counterpart, the House version proposes to create a five-man Philippine Competition Commission as a single venue for anti-competition issues. Similarly, the House version proposes to adopt non-adversarial methods of enforcement, like a request for binding ruling to make the law more business-friendly.

Anti-antitrust law

There are, of course, those who are against an antitrust law. Some economists argue that the need for an antitrust law stems from the wrongful notion that an unhindered and unregulated market leads to coercive monopolies. They assert that no unfair monopoly can ever be created by means of free trade in a free market economy.

Surely, there are policy issues yet to be decided in the plenary sessions of both Houses before an antitrust law becomes part of our statute books.

A basic policy issue, of course, is whether we really need a new antitrust law. If so, do we adopt the American system or the European model? What acts should be outlawed and what type of enforcement mechanism should be adopted considering the stage of our economic development? Should the law go for a separate competition commission or just create an office in the DoJ? How should the competition authority interface with other government agencies, like the Department of Energy, Department of Trade and the Securities and Exchange Commission on antitrust-related matters that, by law, are currently under their jurisdiction?

The big question is, whether a new antitrust law will finally see the light of day or will the bills suffer the same fate as the preceding measures?

Your guess is as good as mine.

(The author, formerly the president and CEO of the Philippine Stock Exchange, is now the co-managing partner and head of the corporate and special projects department of Accralaw. He may be contacted at [email protected].)