Thursday, July 7, 2011

Lawyer's take on the new competition authority

"Why a new competition authority out of the blue?"
by Francis Ed Lim
Published 07 July 2011, Philippine Daily Inquirer
(Original article available online here)

"Last June 19, President Aquino signed Executive Order No. 45 designating the Department of Justice as the Competition Authority for the Philippines.

The EO creates the Office for Competition (OC) under the Office of the Secretary of Justice and tasks it to exercise vast powers and responsibilities relating to antitrust matters. It was issued pursuant to the President’s “power and control over executive departments, bureaus and offices,” as well as his “continuing authority under existing laws to reorganize such executive departments, bureaus and agencies.”
The EO comes in the wake of several bills now pending in Congress to revamp our present laws on monopolies and combinations in restraint of trade. There are several bills in the Senate, among which are Senate Bill No. 1, authored by Senate President Juan Ponce Enrile, otherwise known as the Competition Act of 2010, and Senate Bill No. 123, otherwise known as the Fair Trade Act of 2010, authored by Sen. Sergio OsmeƱa.
There are also 12 antitrust bills in the House of Representatives, among which is House Bill No. 4835, otherwise known as the Philippine Fair Competition Act of 2011, authored by Rep. Rufus Rodriguez.
Senate Bill No. 1 is basically the same as the antitrust bill passed by the Senate in the last Congress. The House versions of the bill are now in their advanced stage. The committees on trade and industry and on economic affairs are now preparing a substitute bill to the 12 antitrust bills filed in the House of Representatives.
My two cents’ worth
Under the present setup, the delineation of powers and responsibilities on antitrust matters is clear. The DoJ takes care of criminal prosecution while the different implementing agencies take care of regulation.
EO 45 appears to radically change this setup. It creates the OC as the super body for antitrust matters. Thus, aside from giving the OC the power to investigate and prosecute violations of our antitrust laws, EO 45 empowers it to “[e]nforce competition policies and laws to protect consumers” and “supervise competition in the markets by ensuring that prohibitions and requirements of competition laws are adhered to.” It also mandates the OC to “[m]onitor and implement measures to promote transparency and accountability in markets” and “[p]repare, publish and disseminate studies and reports on competition to inform and guide the industry and consumers.” Consistently, the EO empowers the OC to “call on other government agencies and/or entities for submission of reports and provision for assistance,” thereby apparently relegating the other agencies to assisting the OC in the performance of its task under the executive order.
The creation of this superbody by an executive order, however, gives rise to more questions than answers. For example, there are matters relating to monopolies and combinations in restraint of trade that are currently under the regulatory jurisdiction of other government agencies. Things that readily come to mind are sale of assets (which include shares of stock) of corporations, corporate mergers and voting trust agreements, all of which must comply with our laws against monopolies and combinations in restraint of trade. These matters are governed by the Corporation Code, which is being implemented and enforced by the SEC. Another example is the Downstream Oil Deregulation Act (RA 8479), which mandates the Department of Trade and Industry and Department of Energy to prevent cartelization, monopolies, combinations in restraint of trade. A live example is the reported P74.1-billion acquisition by PLDT of 51.55-percent shareholding in Digitel, which the NTC is reviewing in the exercise of its powers under the law.
Since EO 45 is silent as to the operating relationship between the OC and government agencies with antitrust powers, the question then is: Should these government agencies now stop exercising their antitrust powers in light of the creation of the OC as the superbody for antitrust matters? Alternatively, should the OC now supervise the various implementing agencies in the way they discharge their antitrust powers and responsibilities? If so, is this just another bureaucratic hurdle that will further complicate doing business in the Philippines? In this regard, “supervising” competition could lead to legal challenges from the private sector.
For another, in the United States, there is no single authority for antitrust matters. The prosecution for antitrust violations is left to the DoJ while the regulatory side is left to the Federal Trade Commission. This model is followed by other countries such as the United Kingdom and other Asean countries.
In other words, the enforcement authority for the antitrust law is a policy matter to be determined by Congress in the exercise of its legislative powers under the Constitution. In fact, a cursory examination of the pending bills in Congress indicates different policy approaches to the matter. On the one hand, Senate Bill No. 1 designates the DoJ as the main implementing agency for the new competition law. On the other hand, Senate Bill No. 123 proposes to create a Fair Trade Commission. The same approach is being proposed by the House of Representatives, which proposes to create the Philippine Fair Competition Commission (PFCC).
More importantly: Why is there a new Competition Authority all of a sudden? Why not just wait for the new antitrust law, a priority bill that President Aquino promised in his first State of the Nation Address? Is the Aquino administration sensing an uphill battle in the enactment of a new antitrust law? Is this a genuine effort to level the playing field pending the passage of a new antitrust legislation? Is this a word of warning to our big business groups that are trying to outdo one another in acquiring businesses? Will the new authority exercise regulation on the antitrust issues raised on PLDT’s acquisition of Digitel?
Your guess is as good as mine!"

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