Litmus test on competition

THERE IS an ongoing test of wills between the Philippine Competition Commission (PCC) and the telecom duopoly of PLDT Inc. and Globe Telecom over the latter’s acquisition of the powerful 700 megahertz band from San Miguel Corp.’s affiliate company.

PLDT and Globe claim the deal can no longer be reviewed by PCC as it is “deemed approved” after notice about the transaction had been sent to it.

Their position is anchored on a circular PCC issued prior to the promulgation of its implementing rules which states, among others, that acquisitions valued at over P1 billion shall be considered approved if PCC is informed about it with relevant information.

According to PLDT and Globe, since they have certified that their notice did not contain false information, the buyout should be allowed to stand and PCC has no authority to question it.

In effect, the duopoly was saying “trust us, all the facts and figures we gave you about the deal are true and should be taken at their face value, so there is no reason for you to look into the transaction any further.”

The PCC took issue with this argument and said it “… reviews all submissions for sufficiency and completeness of information, and decides, after due consideration, if the subject transaction will be deemed approved.

“If a submission is determined to be insufficient or defective in form and substance, for example, the PCC may reject such submission.”

Review

With this premise, the PCC will conduct a comprehensive review of the deal which would involve the “determination of the relevant market, whether there will be substantial changes to the market structure, and the potential impact of the transaction on public welfare.”

Meaning, in layman’s language, it will examine the terms and conditions of the acquisition and determine if it will redound to the best interests of the public and contribute to the growth and development of our economy.

The subliminal message of this action is, the PCC will be steadfast in the performance of its mandate to promote fair competition, and that it will not allow itself to be bullied or cowed to submission no matter how influential the affected business executives may be in the business community.

For now, as far as the PCC is concerned, and even in the wake of veiled threats by the duopoly to hale it to court, the buyout is neither approved nor rejected.
Pending the review of the deal, however, there is no legal impediment for the duopoly to install and operate the facilities needed to use the radio frequencies in question.

In doing so, it’s taking the risk that the deal could be overturned and their investments going down the drain.

Technicality

The duopoly’s position rests primarily on a “technicality” in the PCC circular that the mere filing of a notice with relevant information about the transaction is sufficient to consider it approved.

Following this line of argument, the truth or falsity of the data submitted with the notice is not material. If you are quick or wily enough to rush a deal worth more than P1 billion before the PCC’s implementing rules are promulgated, the PCC forfeits its authority to take a look at it and determine if it conforms to the rules on fair competition.

This approach conveniently ignores the objectives for which the PCC was created by Congress, which is to promote efficient and fair market competition, and prohibit, among others, mergers and acquisitions that limit, prevent, and restrict competition.

The duopoly ought to be reminded that the Supreme Court has stated that resort to technicalities (or loopholes in the law) should not be countenanced if it will defeat the purpose of the law or cause injustice to a party.

If the duopoly sincerely believes the transaction is aboveboard and will be beneficial and advantageous to the public, why the opposition to PCC taking a look at it?

Are there items in the buyout that would show that it is less than arms-length or is a sweetheart contract in disguise? Is the principle of transparency that PLDT and Globe loudly proclaim in their Manual of Corporate Governance mere rhetoric?

Authority

For people in the know about the goings-on in the telecommunications industry, the strong reaction by the duopoly to PCC’s move to exercise its review authority over the buyout does not come as a surprise.

The two companies are used to getting their way in the National Telecommunications Commission (NTC).

The ease by which the duopoly has been able to get favorable action from the NTC on their petitions for rates and charges has been the subject of complaints by cause-oriented groups.
In contrast, complaints for poor mobile and Internet service and deceptive commercials are given the run around.

It’s a classic tail (duopoly) wagging the dog (NTC) relationship that accounts for the deplorable state of the country’s broadband service.

The “regulatory capture” may have created a sense of hubris on the part of the duopoly so they did not look kindly to PCC’s assertion of its regulatory authority over their acquisition of the radio frequencies. How dare this new kid on the block question our integrity!

The PCC should stand pat on its decision to review the subject transaction. It is a test case on its capability to perform the mandate given to it by Congress. Whichever way PCC decides, it will set the standard against which similar contracts in the future will be measured.

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