Aquino set to sign Philippine Competition Act
PRESIDENT AQUINO is signing today a “game-changing” bill deemed by local and foreign business groups as crucial to sustaining the Philippines’ economic growth.
The Philippine Competition Act has long been hailed by its advocates as a new law that will usher in a new era of doing business in the country; curb unfair, anti-competitive trade practices; and help level the playing field for all companies operating in the country, from the large foreign multinationals down to the local micro, small and medium sized enterprises (MSMEs).
Consequently, the improvements to be effected in the business and investment climate due to this law are expected to benefit consumers, given the availability of choices in goods and services, whose prices are expected to be fair, competitive and driven largely by market forces.
“Over the long term, it should result in more competition, resulting in fair pricing of goods and services to consumers,” Trade Secretary Gregory L. Domingo said.
Sen. Paolo Benigno “Bam” Aquino IV, principal author of Senate Bill 2282 or The Fair Competition Act of 2014, explained in a briefer that a competition policy was crucial even in a liberalized market because it:
Defines the rules of the game. It is a myth that in a free market, a business can do whatever it wants. Regulations still exist to facilitate trade of goods and services. The Competition Law provides the framework where free market players can compete fairly for their share in the market;
Encourages more players in the market. Since it clarifies the rules of the game, potential players in the market will feel more secure that they can compete against businesses that are bigger. It safeguards new players or MSMEs from predatory behavior that kill off competition in the market; and
Empowers the consumers with more options in the market. Monopolies trap consumers into buying goods or services at a dictated price. More players in the market will mean more businesses competing for people’s preference, thus driving prices down.
Prohibited acts
The Philippine Competition Act primarily addresses two main prohibited acts, namely abuse of dominant position and anti-competitive agreements, both of which are considered criminal offenses.
Under SB 2282, an anti-competitive agreement refers to any type or form of contract, arrangement, understanding, collective recommendation or concerted action, whether formal or informal, explicit or tacit, written or oral, with the object or effect of substantially preventing, restricting or lessening competition.
Anti-competitive agreements include: price fixing; limiting or controlling production, relevant markets and technical development or investment; dividing or sharing the relevant market, geographically, in terms of volume of sales, type of goods or services, or buyers and sellers; and application of dissimilar conditions to different parties.
Activities under abuse of dominant position include: selling goods or services below the market prices to suppress competition; imposing barriers to entry; imposing restriction on the lease or contract of sale or trade of goods and services that is anti-competitive; and making the supply of such goods dependent on the purchase of other goods or services.
“Businesses, whether big or small, will now be on equal footing as the law penalizes anti-competitive agreements and abuses of dominant players. This will lead to an efficient market economy and a level playing field for all businesses,” Aquino said in a statement issued Monday.
Quasi-judicial body
Enforcing this law is an independent quasi-judicial body to be called Philippine Competition Commission (PCC), which will primarily look into anti-competitive behavior, abuses in dominant positions, and anti-competitive mergers and acquisitions.
The PCC will have the authority to conduct inquiry or investigate upon receipt of a complaint; monitor and take measures to penalize abuses; issue subpoena to testify and produce documents; undertake inspections on business premises that have substantial proof that are anti-competitive; stop or redress anti-competitive acts or behaviors; impose fines and penalties; coordinate with and deputize government agencies to provide information and lend in the discharge of responsibilities; and advocate pro-competitive policies of the government.
It can likewise impose administrative penalties of a maximum fine of P100 million on the first offense and P250 million for the second offense for anti-competitive agreements and abuses of dominant position.
Leniency program
According to Aquino, the PCC is expected to work closely with the Office for Competition (OFC), which is under the Department of Justice.
The OFC will have the exclusive authority over the criminal enforcement of this Act, and will thus serve as the prosecutor in criminal cases filed.
Aquino, in his briefer, further noted that a feature under SB 2282 is a leniency program meant to ensure the efficacy of the bill.
In most jurisdictions, a leniency program is the most effective safeguard of the Competition law.
The leniency program is an incentive that is being granted to a cartel participant, in the form of immunity of suit or reduction of any fine, in exchange for the voluntary disclosure of information regarding the cartel which satisfies specific criteria prior to or during the investigative stage of the case.
