We love monopolies

The 1987 Philippine Constitution provides that the state shall regulate or prohibit monopolies when public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.

The term monopoly was explained by the Supreme Court in the case of Congressman Garcia vs. the Hon. Renato Corona, et al. where it said that in its simplest form, monopoly exists when there is only one seller or producer of a product or service for which there are no substitutes. (G.R. No. 132451, Dec 17, 1999)

In its complex form, monopoly is defined as the joint acquisition or maintenance by members of a conspiracy, formed for that purpose, of the power to control and dominate trade and commerce in a commodity to such an extent that they are able, as a group, to exclude actual or potential competitors from the field, accompanied with the intention and purpose to exercise such power.

It is an oligopoly or cartel when there are two or a few companies that act in concert to control market prices and profits which results in a combination in restraint of trade.

The Supreme Court further explained that Article XII, Section 19 of the Philippine Constitution is anti-trust in history and spirit and it espouses competition. Only in competition that is fair, can we release the creative forces of the market.

The court explained that the objective of anti-trust law is to assure a competitive economy, where competition producers will strive to satisfy consumer wants at the lowest price with the sacrifice of the fewest resources. That reliance on the “market” system shall decide what shall be produced, how resources are allocated, and to whom the products will be distributed. In this way, it is the consumer that decides what and how much shall be produced and, in turn, competition among producers determines who will manufacture it.

In the Philippines, we have the Philippine Competition Act or Republic Act No. 10667 (PCA). This law created the Philippine Competition Commission (PCC) which is the agency tasked to enforce and implement the PCA. It has jurisdiction in the enforcement and regulation of all competition-related issues.

In that regard, the PCA prohibits entering into anti-competitive agreements abusing a dominant market position, and entering into anti-competitive mergers and acquisitions (M&As).

Anti-competitive agreements, which may come in any form, are those that substantially prevent, restrict, or lessen competition. It is illegal for business rivals to act together in ways that can limit competition or hinder other businesses from entering the market. Examples of these are price fixing, bid rigging, output limitation, market sharing.

The PCA also prohibits abuse of dominant position which may happen when a business becomes dominant in a certain industry due to its share in the market. Abuse of dominant position exists when the dominant operator substantially prevents, restricts, or lessens competition in the market.

Some examples are engaging in predatory pricing or selling at a loss to force competitors out of business. There is also price discrimination, which is setting different prices for different customers for the same product or service. Agreeing to sell products or services only when bundled with other products is considered exploitative. Operators can also limit production or access to markets or technical development depriving others of new technology which prejudices consumers.

It is important to note that it is not illegal to be a monopoly or the dominant player in a market for as long as this is not used to lessen competition in the market.

Notably, monopolistic behavior generally refers to actions or practices carried out by a single dominant player in a market, leading to the establishment or maintenance of a monopoly. Whereas, anti-competitive behavior encompasses a broader range of actions that hinder or distort fair competition within a market, which may not be limited to a single dominant player. Both types of behavior can have detrimental effect on consumer choice, innovation and market efficiency which our laws seek to regulate and prohibit.

In the Philippines, while we have made great strides in addressing monopolies and promoting fair competition in several key industries, more work needs to be done.

The administration of President Duterte had allowed the entry of the third telecom player, DITO, breaking the decades-long duopoly of PLDT and Globe. The Oil Deregulation Law opened up the industry to hundreds of small players competing with the big three oil players — Shell, Petron and Chevron. Aside from that, it created numerous importers and bulk distributors or oil products.

Many readers have probably never experienced the time when an application for a landline connection from PLDT may take years and when filling up one’s vehicle meant only going to a Shell, Caltex, or Petron gasoline station.

However, despite improvements, we seem to love monopolies, duopolies and oligopolies and cheer on dominant players.

In transportation, for years now, the market for motorcycle taxis is dominated by Angkas, Joyride, and MoveIt; and for four wheel vehicles, Grab. Last year, newspapers reported that Grab acquired MoveIt.

The administration of President Marcos has signified that it wants the riding public to have more options and alternatives which is why the DOTr, LTFRB and LTO are now working hard processing the approval and accreditation of new motorcycle taxi operators and Transport Network Companies for four wheels. This would be a welcome development considering the demand for the service far outpaces the supply.

Then there is SM, the dominant leader in the department store, mall,  and supermarket sectors, which has enough power to dictate upon suppliers and sellers. If they wanted to sway or dictate consumer preference, they could do so by limiting the choices of goods and brands available.

Even in healthcare, particularly hospitals, there are only a few major players such as Ayala Healthcare Holdings, Metro Pacific Investments Corp, The Medical City, and the Catholic Church, that control the major hospitals.

New doctors may find it difficult, if not impossible, to obtain clinic space in these established hospitals even if they had the money, as they will probably need to have a connection with the hospitals to be allowed to purchase a clinic space.

In the field of law, there could also be a high-barrier to success, as the minority of lawyers who belong to certain organizations would at times control key positions in the government, in the private sector law offices, and the Integrated Bar of the Philippines. This is probably the result of the fact that there are only a handful of law schools that produce bar topnotchers.

Big institutional law offices also have oversized influence and corner foreign contracts and clients, which are the most lucrative, in terms of fees and compensation. Inevitably, their actions and decisions have an outsized influence on the practice in terms of compensation for lawyers, practice and standards.

To be fair, the Supreme Court continues to implement reforms such as regionalizing the bar examinations, reforms in the Integrated Bar of the Philippines and in the Judiciary.

While the Philippines ranks only 64th in the world in terms of geographical size, it is the 13th most populous country in the world.

Accordingly, a few dominant players having an outsized influence and control over our not so small population would not in theory contribute to the best and most efficient way to allocate our resources. This will not create the environment of a free market allowing for sufficient alternative choices for everyone. We must encourage fair and true competition in all aspects of our society as well as promote meritocracy as the basis of who will succeed and get ahead. This is the only way forward.

(The author, Atty. John Philip C. Siao, is a practicing lawyer and founding Partner of Tiongco Siao Bello & Associates Law Offices, an Arbitrator of the Construction Industry Arbitration Commission of the Philippines, and teaches law at the De La Salle University Tañada-Diokno School of Law. He may be contacted at [email protected]. The views expressed in this article belong to the author alone.)