Wednesday, January 4, 2012


"This Could Be The Tipping Point"
by Emil Jurado
04 January 2012, TO THE POINT, Manila Standard Today
(Original article available online here).

Last month, I wrote about developments on the charges filed at the Regional Trial Court in Quezon City against five top officers of Nestle Philippines Inc. Its senior vice president and head legal officer took exception to some items raised in my column about the case.

In its letter to the editor of this newspaper published last December 22, NPI claimed that the complaints of predatory pricing filed against the company by two of its former distributors have been dismissed via a resolution of the QC Prosecutor’s Office dated December 5, 2011.

However, that claim, according to noted lawyer Lorna Patajo Kapunan, is “blatantly inaccurate and misleading.” She says that the Resolution is still the subject of a pending petition for review filed in behalf of the distributors by Kapunan Garcia and Castillo Law Offices before the Department of Justice.

Kapunan points out that the Motion to Withdraw filed in the Regional Trial Court by the Office of the City Prosecutor of Quezon City is still pending, and the outcome of the motion has not been resolved nor granted by the presiding judge. In short, the criminal case filed against the Nestle executives still stands.

But I must have been affected by the holiday daze when I typed out that Nestle was adjudged Employer of the Year during the Philippine Advertising Congress held early last month. “Employer” should have been “Advertiser” and there’s no question about that. Nestle did unload a huge advertising outlay to drum up its 100 years existence in the Philippines. Its prestigious presence here now stands in the balance depending on the outcome of these cases which have a direct bearing on current moves to finally introduce the long overdue Anti-Trust Law.

*** "

Monday, December 12, 2011


"Impeaching Corona Not Far Behind"
by Emil Jurado 
09 December 2011, To The Point, MANILA STANDARD
(Original article here).

Some businessmen friends recently asked me about the statute of the much ballyhooed proposal for an Anti-Trust Law that would finally give teeth to Article 186 of the Revised Penal Code. This refers to prohibition from entering into or being a party to any contract or agreement, or from taking part in any conspiracy or combination in restraint of trade or commerce for the purpose of preventing by artificial means, free competition.

As far as I can recall, the move to have such a law introduced received a boost last August when five top officers of the giant multinational Nestle Philippines Inc. were indicted for violation of Article 186 of the Revised Penal Code. The charges were an offshoot of complaints against Nestle by two of its distributors, Service Edge Distributors Inc. and FDI Forefront 2 Trading Corporation.

The Filipino firms alleged that Nestle engaged in predatory pricing, imposition of inflexible price bulletins that resulted in luge losses to the distributors, unilateral withdrawal of promised marketing support, violation of the terms and eventual termination of the distribution agreement, perjury and offering false testimony in evidence.

I suppose that hearings of the charges against Nestle officials have been scheduled at the Quezon City Regional Trial Court. Resolution of this matter will have an important bearing on the perceived overhearing conduct of multinational firms towards not only their competitors, but even to their own distributors, who are in fact their business partners. Interestingly enough, during the recently concluded Philippine Advertising Congress in Camarines Sur, Nestle Philippines was adjudged Employer of the Year. Well, the company certainly will not win an award of any kind from its distributors who feel they have been wronged.


Friday, November 4, 2011

NESTLÉ PHILIPPINES, Inc. officials have been accused of fixing wholesale prices.

Nestlé officials accused of price fixing

by N.R. Melican
BusinessWorld Online, 31 October 2011
(Original article availble online here).

A CITY prosecutor’s office has found probable cause to charge Nestlé Philippines, Inc. officials with price fixing after distributors complained that the local arm of the food giant required their products to be sold for a dictated cost.

As such, the case has been filed at the Quezon City Regional Trial Court and raffled to Branch 97 at present.

In a resolution issued Aug. 15, 2011, Quezon City First Assistant City Prosecutor Meynardo M. Bautista Jr. ruled there was weight behind complaints against six officials -- former Nestlé Philippines chairman and chief executive officer (CEO) Doreswamy Nandkishore, incumbent chairman and CEO John Martin Miller, Sales Director Shahab Bachani, Chief Finance Officer Peter Noszek, and sales officials Jose Ceballos and Maria Elisa Lupena -- accused of imposing predatory prices for goods, a violation of Article 186 of the Revised Penal Code.

Nestlé Philippines could not be immediately reached for comment.

FDI Forefront II Trading Corp. and its parent firm Service Edge Distributors Inc. (SEDI) took issue with the price bulletins Nestlé Philippines issues to middlemen dictating the cost at which Nestlé products should be sold to retailers. Distributors are told to follow the selling prices in the bulletins or face termination of the distributorship agreement.

The two firms -- which were formerly assigned to distribute Nestlé products in northwest Quezon City, Caloocan, Malabon, Navotas and Valenzuela -- claim that the price bulletins do not take into account several factors: the cost of financing for the goods, municipal business taxes, cost of bad debts for bad or poorly paying retailers, cost of discounts given to retailers and cost of bad goods.

Nestlé Philippines terminated its distributorship agreement with FDI in late 2007 and that with SEDI in September 2011.

The respondents countered, however, that the two distributors’ claims are baseless, saying that price fixing only occurs when multiple firms agree to set prices to restrain trade.

The city prosecutor’s office decided, however, that the case was worth pursuing.

“The act of Nestlé in fixing the resale price maintenance for its products… is illegal, a per se violation of paragraph 1 of Artice 186, Revised Penal Code, which means that price fixing is automatically illegal and there will be no valid justification to legitimate price fixing agreement,” the resolution read.

“Even if the agreement of Nestlé and the complainants is to be analyzed under the rule of reason, the act is also unlawful because of its harmful anticompetitive effects against consumers and complainants, with no competitive economic benefits,” the resolution read further.

“[This is] harmful to the consumers because Nestlé exercised monopoly power of price fixing the resale of its goods which means that consumers cannot buy the product at a lower price than that fixed by Nestlé,” it stated.

The Nestlé officials could be “criminally liable,” the resolution stated. -- N.R. Melican

Monday, October 3, 2011


"Time to pass an antitrust law"
Sen. Manny B. Villar
BUSINESS MIRROR, Entrepreneur, 19 September 2011
(Original article available here)

First of two parts
"The time is ripe for the Philippines to enact a comprehensive antitrust law. Let me tell you why.
First, the global financial crisis of 2008, which plunged two-thirds of the world into recession and which continues to threaten the developed economies, has shifted the flow of capital into emerging markets, such as the Philippines, which are now leading economic growth and offering better returns for investments.
The Philippines can expect a bigger share of foreign investments as a result of this shift in capital flow because of its strategic location. It is close to China, which is aggressively investing in other countries not only to make money but to ensure adequate supplies of raw materials and intermediate goods for its own industries.
Second, the volatility in the prices of essential goods like oil and other food commodities, which must be imported. We have to import rice because of our inability to produce enough rice for domestic consumption. We also have to import wheat (for flour) because we don’t grow this cereal.
Third, there are so few players in many of our industries, providing the temptation and the environment for the operation of cartels and monopolies.
The hearings conducted by the Senate Committee on Economic Affairs, of which I’m chairman, and the Committee on Trade and Commerce, on several bills and a resolution proposing the enactment of an antitrust law underscored the relevance and the urgency of such legislation.
In particular, Senate Resolution 123, which I introduced, expresses concern about the undue advantage that cartels and monopolies pose over our micro, small and medium enterprises.
During the hearings, Trade and Industry Undersecretary Adrian Cristobal stressed that a competition or antitrust law would promote investments and facilitate trade between the Philippines and other countries. Attorney Lorna Patajo-Kapunan explained that antitrust provisions could be found in existing laws like the Revised Penal Code, New Civil Code and the Consumer Act of the Philippines.
However, these provisions do not provide for clear-cut guidelines or evidence to determine whether an act constitutes unfair competition, monopolistic behavior or restraint of trade.
Attorney Anthony Abad, managing director of the Trade Advisory Services of the Ateneo Center for International Economic Law, said it was fortunate that the 15th Congress was prioritizing the antitrust bill, enactment of which would have a transformative effect on the way business is done in the country.
The Constitution itself provides the basis for the enactment of an anti-trust law. Under Article XII, Section 19, the state is mandated to “regulate or prohibit monopolies when public interest so requires” and disallows “combinations in restraint of trade or unfair competition.” Section 22 of the same article provides: “Acts which circumvent or negate any of the provisions of this article shall be considered inimical to the national interest and subject to criminal and civil sanctions, as may be provided by law.”
Monopolies exist when one major company has enough power to dictate the prices, quality and selection of products and services, thereby becoming very powerful because competitions are not big enough to threaten that company.
On the other hand, a cartel is a group of companies producing the same product or service which, instead of competing with each other, agree to jointly control the price or supply of their common product or service, to the detriment of consumers.
Since consumers have no other product choices, monopolies or cartels can increase or decrease prices at will. In the end, the people who suffer most are those who already have low purchasing power like the minimum-wage earners or small entrepreneurs.
To this day, the Philippines does not have a comprehensive and developed legislation relating to antitrust and monopoly activities.
We need a comprehensive law that will give meaning to the principles of fair market and discourage monopolies, to afford our micro, small and medium enterprises the opportunity to participate in the growth of our economy.
The Senate Committees on Economic Affairs and on Trade and Commerce have come up with a draft bill, which consolidates Senate Bill 1 introduced by Senate President Juan Ponce Enrile together with Senators Ralph Recto and Antonio Trillanes; Senate Bill 123 by Sen. Serge Osmeña; Senate Bill 1838 by Sen. Miriam Santiago and my Senate Resolution 123.
The consolidated measure, when enacted into law, will encourage competition in the marketplace, help reduce prices and increase the quality of products or services for the benefit of consumers."


"DOJ as competition authority"
Lito U. Gagni
BUSINESS MIRROR, Market Files, 20 September 2011
(Original article available here)

"CAN the Department of Justice (DOJ) pursue a similar line of complaint that the US DOJ advocated against a looming merger between AT&T and T-Mobile on issues of dominance that is now the subject of a controversy involving Philippine Long Distance Telephone Co. (PLDT) and Digital Telecom, which owns Sun Cellular? This merger issue, we believe, is at the heart of an executive order that sought to make DOJ as a competition authority.
As of yesterday, the state attorneys general of New York, Washington, California, Illinois, Massachusetts, Ohio and Pennsylvania have joined the US Justice Department in its suit against the proposed acquisition by AT&T of T-Mobile.
One needs only to look at what is happening in the US to determine that the proposed acquisition by PLDT of Sun Cellular would mean a 70-percent control of the frequency, the digital roadway, which smacks of dominance and goes against the grain of letting competition dictate the tempo of the business game. This is why it is important to look at what’s happening in the US in the business of telcos to know that PLDT’s acquisition of Sun would have the same impact as that of AT&T’s on T-Mobile and should, therefore, be an occasion for the DOJ to pursue its mandate as the competition authority.
No less than President Aquino sounded the alarm on the return of the monopolies. Remember that it was during the dark days of the monopoly of PLDT when 98 percent of the population was waiting for a line and 2  percent was waiting for a dial tone. This quotable quote from Singapore’s Lee Kwan Yew was what possibly moved then-President Fidel V. Ramos to open the telco industry to other players.
That opening of the telecom industry to other players is what allowed the Philippines to become an investment destination and now we are reaping the benefits of that Ramos vision to rid the sector of the monopolistic situation. As a result, thousands of jobs were created, with the business-process outsourcing industry leading the way. It is thus unfortunate to know that the telco sector is again being threatened by the PLDT-Sun deal. Perhaps, the DOJ can look at the options open to prevent a repeat of the problem. For starters, it may want to google the AT&T-T-Mobile deal and discover how US state attorneys are doing it.

Friday, September 30, 2011


"Is It Antitrust Worthy?"
Francis Ed Lim
PHILIPPINE DAILY INQUIRER, Point of Law, 15 September 2011
(Original article available here)

"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-managingpartner and head of the corporate and special projects department of Accralaw. He may be contacted at"