Thursday, May 26, 2011

Part 2 - anti-trust in BusinessWorld

"Part 2 - Anti-trust protection for SMEs"
by Atty. Lorna Patajo-Kapunan
BusinessWorld Online, 25 May 2011
(Original article available online here)

View Part 1 here and here

"Part II

It cannot be denied that, despite economic reforms, the Philippines continues to move forward as a country of service providers.

The country is replete with BPOs, retailers, distributors, mom and pop stores, "sari-saris" and all forms of SMEs. We provide support and muscle to the brains -- the multinationals who call the shots, lay down the requirements, and demand the services that we provide.

It is not uncommon to have existing service agreements where there is no equal footing between the two parties; the foreign company will typically have more superior leverage and bargaining power than the Filipino SME.

The result is that the relationship will be that of the Filipino SME being at the beck and call of the multinational. There is no real or adequate protection for the middleman -- and more often than not, it is the Filipino SME which acts as the middleman.

While anti-trust cases are few and far between, the Supreme Court has on occasion ruled that the termination of a multinational of the distributorship agreement of its local distributor was illegal and constituted bad faith. In the said case, the Supreme Court ruled that the Filipino SME had to bear the brunt of distribution and impossible sales quotas set by the multinational, with the latter reneging on its earlier promises of support under the agreement.

Yet these kinds of agreements are not only typical but recurrent. Multinationals, after all, maintain the upper hand -- a Filipino SME constantly faces the underlying threat of having its service agreement terminated by the foreign company.

And why not? First, there is no law or policy protecting these Filipino middlemen. Second, a local company providing BPO services to a multinational is just one of many Filipino SMES eagerly lining up to do business with the big foreign company.

If the Filipino SME falls behind a quota set by the foreign "partner," then the latter can just promptly pull the plug -- after all, there are dozens of other small, practically interchangeable, Filipino companies waiting in the wings.

In the scenario mentioned earlier, what is often overlooked is that when a foreign company pulls the plug by deciding to illegally terminate its service contract with a local company, the Filipino SME loses not just a contract, but loses its entire business.

This means people losing their jobs, Filipino entrepreneurs losing everything they put up to start the business. You have cases wherein hundreds of employees are suddenly laid off before Christmas because a multinational decided to terminate its service agreement with its local Filipino distributorship.

There is no real leverage, no equal protection, to ensure that the small Filipino business is treated as a real partner by the foreign company or multinational. This is why there is an urgent need for a comprehensive anti-trust law, and a regulatory agency with teeth.

We are also being encouraged to all collectively be watchdogs for anti-trust acts committed around us -- by the companies we work for, the companies we deal with, and even the companies which provide our basic household needs."


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