ANTI-TRUST CASE AGAINST NESTLE PHILIPPINES FILED IN RTC QC

MORE ON THE COMPETITION AUTHORITY

"DOJ as competition authority"
by
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.

xxx"

Nestle execs face trial

"A Climate of Uncertainty"
by Emil Jurado
MANILA STANDARD, To The Point, 06 September 2011
(Original article available here)

"***

Calls for the passage of an effective and all-embracing anti-trust law in the country appear to have received renewed interest in the wake of a resolution handed down by the Office of the Quezon City Prosecutor in a case filed against multi-national Nestle Philippines Inc.

In an August 15 resolution, City Prosecutor Donald Lee approved the recommendation of First Assistant City Prosecutor Meynardo Bautista Jr. that charges be filed in court against high officials and executives of NPI for violation of Article 186 of the Revised Penal Code.

This particular provision contains a prohibition against 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.

Those recommended for indictment are NPI chairman and CEO John Martin Miller, Chief Finance Office Peter Oszek, Business Executive Manager Shahab Bacani, Regional Sales Manager Jose Ceballos and Area Sales Manager Elisa Lupena.

***

The case stemmed from complaints filed against Nestle by service Edge Distributors Inc. and FDU Forefront II Trading Corp. (FDI 2), two Filipino firms serving as distributors of Nestle products in Metro Manila.

The allegations against Nestle include predatory pricing, violation of the terms of distribution agreement between Nestle and the two distributors, unjust termination of the said agreement, imposition of inflexible price bulletins that resulted in huge losses to the distributors, unilateral withdrawal of promised marketing support, perjury and offering false testimony in evidence.

Investigations established the existence of a vertical agreement between Nestle and its distributors, wherein the former fixes the resale price of the products. The agreement compels the distributors to sell the goods only at the price dictated by Nestle, otherwise, their distributorship contract will be revoked.

The resolution also said that the respondents, who were then officials of Nestle Philippines, Inc., knowingly committed the crime or permitted or failed to prevent the commission of the said crime. Hence, they are criminally liable.

Nestle was also accused of fixing the resale price of its products and imposing upon its distributors that these prices be maintained. This is in violation of Article 18 of the Revised Penal Code, which says that price fixing is automatically illegal and there will be no valid justification to legitimate price-fixing agreement.

If I may read between the lines, I would say that the resolution represents a triumph not only of the two Filipino distributors, but also of the common Filipino consumer. This case sends a strong message to other multinationals that their abusive practices will not be tolerated. Significantly, it also encourages similarly situated Filipino distributors and marketing outfits that they can rely on the government to uphold and to protect their rights."

NESTLE PHILIPPINES: MONSTER MNC

"MONSTER MNC IS 100"
by Ducky Paredes
MALAYA, Business Insight, 05 September 2011
(Original article available here)

"PEOPLE and multinational corporations both have birthdays but with a big difference. Humans tend to become kinder as they approach the end of their time on earth; multinationals get to be more powerful and, as their reach expands, more dominant, exploitative and even criminally abusive. Not all, of course; as with humans, there are good and bad multinationals.

One multinational celebrated its hundredth year recently by bullying and throwing its weight around to the detriment, not just of its competitors, but also even of its own business partners.

At last, the multinational is getting its comeuppance. For starters, the force of the law, imperfect as it is in this country, seems to be working against the multinational. A judge is looking them over and entertaining complaints filed by Pinoys who were abused by the MNC and forced into a state of near-bankruptcy.

There is even more trouble due the MNC in the form of bills pending in the Senate and the House of Representatives intended to improve current laws against monopolistic behavior, predatory pricing and restraint of trade, sponsored by Senate President Juan Ponce Enrile, Senator Sergio Osmeña and Representative Rufus Rodriguez. .

The giant multinational, which is Nestle Philippines, Inc. (NPI), just turned 100 recently. Nestle, as with most other MNCs, celebrated its longevity by launching corporate social responsibility (CSR) projects backed up by lavish advertisements in print, radio, television and cinema showing how the multinational has been a good corporate citizen. In the case of Nestle in the Philippines, one wonders whether this the true picture of the company.

NPI’s festivities were somewhat rained on when the Office of the City Prosecutor of Quezon City issued a resolution on August 15 finding sufficient evidence to hold NPI for trial for violation of Article 186 of the Revised Penal Code.

This article penalizes any person "who shall enter into any contract or agreement or shall take part in any conspiracy or combination in the form of a trust or otherwise, which results in restraint of trade or commerce and prevents, by artificial means, free competition in the market."

The resolution found merit in the complaint filed by Nestle distributors FDI Forefront II Trading Corporation and Service Edge Distributors, Inc. that their agreements with Nestle were anti-competitive since they were obligated to sell Nestle products at the price fixed by NPI, regardless of the fact that the set price provided too thin a margin for the distributors to make a profit. Failure by the distributors to sell under these terms would result in the unilateral termination of their agreement with NPI. Their complaint pointed to a situation when NPI forced them to sell to a set of customers at a loss because of the fixed price set by NPI.

According to the QC Prosecutor’s resolution, "the act of Nestle in fixing the resale price maintenance for its products, imposing it on complainant is illegal, a per se violation of paragraph 1 of Article 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 further stated that an analysis of the agreement shows that the act is also unlawful "because of its harmful anti-competitive effects against consumers and complainants, with no competitive economic benefits. Harmful to the consumers because Nestle 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 Nestle."

High ranking NPI executives, former Chief Executive Officer Doreswamy Nandkishore, current CEO John Martin Miller, Shahab Bahcani and Peter Noszek were impleaded for conspiring to commit anti-competitive acts as they were found to have knowingly committed the crime or to have permitted or failed to prevent the commission of the crime, and will stand trial before a Regional Trial Court of Quezon City.

The resolution is a welcome development, not only to the complainants, but to those who support the passage of an Anti-Trust Law, coming as it does on the heels of President Noynoy Aquino’s signing of Executive Order No. 45 giving full jurisdiction to the Department of Justice over matters related to competition and fair trade practices.

Lawyer Lorna P. Kapunan recalled the president’s assurance that the matter of monopolies and corporate bullying tactics was one of the first issues that he would look into. "His signing that E.O. shows that he is taking active steps to back up his promise," Kapunan said.

Nestle insiders say that the top honchos in the company’s main office in Switzerland are closely monitoring the woes that the local hundred-year-old outfit is experiencing. The rift between NPI and its distributors was reportedly on the agenda when the mother company’s chief executive Paul Burke and executive vice president Frits Van Dijk came all the way from Switzerland to meet with NPI officials (and also incidentally, to participate in the company’s centennial celebration).

Will the mother company in Switzerland do anything to convert the image of the centenarian company into a more grandfatherly one in its dealings with its business partners or will Nestle continue to exhibit the worst traits of a MNC monster?"

Anti-trust crusaders hail EO45

"Anti-trust crusaders hail Aquino order"

Published 12 July 2011 in Malaya

(Original article available online here).

"The Young Lawyers in Support of Antitrust Law, together with a number of Filipino distributors and lawyer-anti-trust crusader Lorna P. Kapunan, hailed the signing by President Aquino of Executive Order No. 45 which gives full jurisdiction to the Department of Justice (DOJ) over matters related to competition and fair trade practices.

"President Aquino assured Filipinos that the matter of monopolies and corporate bullying tactics was one of the first issues that he would look into. By signing this executive order, he has shown that he is taking active steps to back up that promise," Kapunan said.

EO 45 creates the Office for Competition (OC) whose mandate is to investigate and prosecute all anti-trust violations. 

The OC is also tasked to "enforce 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." 

The OC must likewise "monitor and implement measures to promote transparency and accountability in markets" and "prepare, publish and disseminate studies and reports on competition to inform and guide the industry and consumers."

Kapunan said with EO 45, "Filipino entrepreneurs beleaguered by unfair business practices of giant conglomerates will now know exactly where they should seek help." 

"Now that it is clear which agency has jurisdiction, I am certain that more Filipino distributors will take action against exploitation by multinationals," she said. 

A number of pending legislative bills are in collaboration with EO 45, most of which are intended to improve current laws on monopolistic behavior, predatory pricing, and the restraint of trade. 

There is Senate Bill No. 1 ("The Competition Act of 2010") authored by Senate President Juan Ponce Enrile, and Senate Bill No. 123 ("The Fair Trade Act of 2010") authored by Sen. Sergio Osmeña. 

There are 12 anti-trust bills in the House of Representatives, among them House Bill No. 4835 ("The Philippine Fair Competition Act of 2011") authored by Rep. Rufus Rodriguez."

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 Osmeña.

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!"

Office of Competition rules nearly ready

"Office of Competition rules nearly ready"

Published in BusinessWorld Online, 04 July 2011

Hit the stands on 05 July 2011

(Original article available online here)

"THE JUSTICE DEPARTMENT expects to soon begin tackling competition issues with guidelines implementing the Palace-ordered mandate likely out next week, a Cabinet official yesterday said.

Justice Secretary Leila M. de Lima said the rules that will govern the planned Office for Competition under her department are still being finalized.

“We are still discussing the guidelines. We hope to release it by next week,” Ms. de Lima said.

Among the issues the competition office will study is Philippine Long Distance Telephone Co.’s (PLDT) planned purchase of rival Digital Telecommunications Philippines, Inc. (Digitel).

“[T]here are [alleged] anti-trust issues in the deal,” Ms. de Lima said.

Executive Order 45, signed by President Benigno S.C. Aquino III on June 9, designated the Justice department as the country’s Competition Authority. It was tasked to investigate violations of competition laws and prosecute violators; “supervise competition in markets” by enforcing such laws; as well as prepare, publish and disseminate studies and reports on competition to inform and guide industry and consumers. It will target monopolies, cartels and other “combinations in restraint of trade”.

The order also formed an Office for Competition under the Justice secretary’s office to carry out the Competition Authority’s functions.

Ms. de Lima said the guidelines, which are being deliberated by an internal panel composed of herself, Justice undersecretaries and assistant secretaries, among others, will adhere to the provisions of Mr. Aquino’s directive.

“We also had to keep in mind that for this year, the budget [for the competition office] will come from the DoJ (Department of Justice) budget and it will only be next year that a full allocation will be made for the office,” she added.

Ms. de Lima has said that the competition office , likely to be staffed by current state lawyers, would also engage the services of technical consultants and advisers from the private sector."

Previous related BusinessWorld post here.

DOJ formulating guidelines for competition office

"DOJ to formulate guidelines on competition authority"

Published in Positive News Media, 23 June 2011

(Original article available online here)

"MANILA, June 23 (PNA) – Department of Justice (DOJ) Secretary Leila De Lima will meet all the officials of the Department of Justice (DOJ) to formulate guidelines in investigating all cases involving violations of competition laws and prosecute violators to prevent, restrain and punish monopolization, cartels and combinations in restraint of trade. 

“We need to come up with guidelines on competition authority, the unit that will handle anti-trust cases because of Executive Order 45,” De Lima said.

Under E.O. 45, the DOJ is empowered to act as “Competition Authority” that would “investigate all cases involving violations of competition laws and prosecute violators to prevent, restrain and punish monopolization, cartels and combinations in restraint of trade.”

The DOJ is also mandated under E.O. 45 to “enforce competition policies and laws to protect consumers from abusive, fraudulent, or harmful corrupt business practices and monitor and implement measures to promote transparency and accountability in markets.”

Likewise, the DOJ is also tasked to “supervise competition in markets by ensuring that prohibitions and requirements of competition laws are adhered to, and, to this end, call on other government agencies and/or entities for submission of reports and provision for assistance.”

The DOJ under E.O. 45 carries the responsibility to “prepare, publish and disseminate studies and reports on competition to inform and guide the industry and consumers; and promote international cooperation and strengthen Philippine trade relations with other countries, economies, and institutions in trade agreements.” (PNA)"

Competition office to deal with monopolies

"Monopoly madness"

Published in People's Journal Online, 23 June 2011

(Original article available here).

"Bigness, as the old saying goes, is badness.

Monopolies stifle innovation because it diminishes, if not eliminates, competition. The result: poor-quality products or shoddy services.    

They are, therefore, inimical to the public interest, particularly consumer welfare.

A monopoly in the telecom sector is one such scenario.

Earlier, Globe Telecom raised the bogey of a return to the bad, old days of monopoly in the telecom sector.

Globe’s fears about the Philippine Long Distance Telephone Co. gobbling up of Digital Telecommunications, resulting in a vast “control of spectrum,” a scarce resource that is crucial to the delivery of services in the telecommunications highway, are understandable .

This spectrum is at the heart of the argument of Globe in protesting what it said was the vesting of a wide swath of the roadway to PLDT after it devoured Digitel.

The spectrum is much like the lanes at the North Luzon Expressway. By letting PLDT control more than the majority of the lanes, Globe argued that it would be put at a disadvantage in the face of considerable costs just to stay afloat since the very lifeblood of the telecom business -- the spectrum -- is in the hands of the telecom titan.

Globe hearkened to the dark days of the monopoly which deprived the country of a magnet for foreign investors. Why? Because the mighty PLDT refused to give access to other telecom carriers.

As a result, the telecom sector endured the dark days when 98 percent of the population were waiting for a telephone line and the other two percent were waiting for a dial tone.

Quite thankfully, the Ramos administration took pains to implement a vibrant business model for the telecom sector, paving the way for the entry of new players. 

But here’s a whiff of good news: Justice Secretary Leila De Lima said she would meet officials of the Department of Justice to formulate guidelines for the investigation of cases involving violations of competition laws.

De Lima  wants to prosecute violators of these laws in a bid to crack down on monopolization, cartels, and the restraint of trade.

“We need to come up with guidelines on competition authority,” De Lima was quoted by a major broadsheet as saying. “The unit will handle anti-trust cases under Executive Order 45,” she said.

EO 45 empowers the DoJ to investigate all cases involving violations of competition laws and prosecute violators.

Under the latest EO, the Justice department is also mandated to “enforce competition policies and laws to protect consumers from abusive, fraudulent or harmful corrupt business practices.”

It is likewise tasked to supervise competition in markets by ensuring that prohibitions and requirements of competition laws are followed. Thus, the DoJ requires government agencies and other entities “to submit reports and provisions for assistance.”

The department also has the responsibility to “prepare, publish, and disseminate studies and reports on competition” to inform and guide the industry, and consumers about their rights and responsibilities."

DOJ hopefully puts teeth in competition office

"Justice department to put teeth into anti-monopoly guidelines"

by Tetch Torres

Published 22 June 2011, INQUIRER.net

(Original article available here).

"MANILA, Philippines—Justice Secretary Leila De Lima will meet officials of the Department of Justice (DoJ) to formulate guidelines for the investigation of cases involving violations of competition laws.

The secretary wants to prosecute violators of these laws in a bid to crack down on monopolization, cartels and the restraint of trade.

“We need to come up with guidelines on competition authority,” De Lima said. “ The unit will handle anti-trust cases under Executive Order 45,” De Lima said.

EO 45 empowers the DoJ to investigate all cases involving violations of competition laws and prosecute violators of these laws.

Under the latest EO, the DoJ is also mandated to “enforce competition policies and laws to protect consumers from abusive, fraudulent, or harmful corrupt business practices.”

The DoJ is likewise tasked to supervise competition in markets by ensuring that prohibitions and requirements of competition laws are followed. The DoJ, thus, requires government agencies and other entities “to submit reports and provisions for assistance.”

The DoJ also has the responsibility to “prepare, publish and disseminate studies and reports on competition” to inform and guide the industry, and consumers about their rights and responsibilities."

Government competition office taking shape

"Government competition office to take shape next week"

Published in BusinessWorld Online, 21 June 2011

(Original article available here)

"THE NEW Office for Competition established by recently issued Executive Order (EO) No. 45 is expected to take shape next week when the Department of Justice holds a meeting among its officials to iron out details of its mandate and its organization, the head of the department told reporters on Tuesday.

"Early next week, I will convene a meeting with undersecretaries, assistant secretaries and key officials of the department to come up with clear guidelines and a blueprint for the Competition Office, the unit in the Department of Justice which will handle competition and antitrust cases," Justice Secretary Leila M. de Lima said.


President Benigno S. C. Aquino III last June 9 signed EO 45, which designated the Department of Justice (DoJ) as the Competition Authority and established the Office for Competition under it.


As Competition Authority, the DoJ is tasked to investigate violations of competition laws and prosecute violators; "supervise competition in markets" by enforcing such laws; as well as prepare, publish and disseminate studies and reports on competition to inform and guide industry and consumers.


Among others it will target monopolies, cartels and other "combinations in restraint of trade."


EO 45 also formed an Office for Competition under the Office of the Secretary of Justice as the Competition Authority’s arm to carry out its functions.


The same order said the Justice secretary will designate the head of the office, which will be manned by legal and technical experts, as well as "consultants and resource persons."


"It should be an official from the DoJ who should head that [office]," Ms. de Lima said.


"Most of the personnel who will work in it are our state counsels and lawyers," she added, noting that the Office of the Government Corporate Counsel could be tapped to assist the new body.


"Under the executive order, we can engage the services of technical consultants and advisers in the fulfillment of the mandate. We will discuss who we can appoint as consultants," Ms. de Lima said.


She noted that some officials in the department have already told her of their willingness to work for new office.


Last week, Ms. de Lima said the new office was designed to ensure "economic justice for all."


"It is the consumer that would suffer if we have monopolistic actions...in any industry," the Justice chief had said. -- NRM"
 

TXTM8's take on the competition authority vs competition policy

"New Kid on the Anti-Trust Block: Department of Justice"

by Mars Veloso

Published 17 June 2011, TXTM8

TXTM8 is Consumer Advocacy Group for Telecommunication Issues in the Philippines

(Original article available here).

"Aside from the glaring fact that prominent newspaper columnists seem to be lobbying for either Globe or PLDT, let’s review the external pressure placed upon the National Telecommunications Commission (NTC) to approve/disapprove the share swap agreement between PLDT and Digitel:

1. The Senate Public Services Committee has undertaken an independent review… and has decided that it was without power to interfere.
2. At least three (3) congressional resolutions have been passed to probe the deal. Unfortunately, Congress is in recess.
3. The Department of Science and Technology (DOST) has been tasked to jointly review the deal with the NTC.
4. The National Economic Development Authority (NEDA) is being pushed to study the effects of the “merger” on the public welfare.
5. And now, via Executive Order No. 45, the Department of Justice (DOJ) has been designated as the country’s “competition authority.”

What is glossed over however from this series of high-profile developments in the media is that the NTC itself is sitting on a gold mine. It has in its possession a relevant, existing, well-researched competition policy document which highlights best practices from around the world to guarantee that competition can thrive even in monopoly-rich environments. Is attention being given to this document? Senators Osmena, Arroyo, and Recto appear to have understood the relevance of this document during the recently concluded senate inquiry. The NTC has acknowledged its existence… and that it is still “being studied.” No mention is made of the fact that this document has lingered in the NTC’s archives for four or five years.

Now that a monopoly is being subtly re-engineered, today is the best time to ensure that the document’s contents become pre-conditions to the approval of the share-swap agreement. Today is the best time to make the relevant government agencies aware that a sector-specific competition policy document actually exists… and that it was created by the very entity charged to enforce it: the NTC!

The execution of such a policy document can serve as the middle ground for the regulator; a virtual “win-win” scenario in the controversial application process now being undertaken by PLDT and Digitel. If properly implemented, the telecom giants win by having their “merger” approved and the public wins by the very fact that true competition is finally allowed to exist in the market. The only question is: will the NTC finally execute? Or will it falter once more?"

Possible implications of EO 45

"Palace evasive over EO 45 effect on PLDT-Digitel deal"

by Aytch S. de la Cruz

Published 17 June 2011, The Daily Tribune Online

(Original article available here).

"Malacañang yesterday refused to venture an opinion whether the freshly issued Executive Order (EO) 45 that aims to stop monopolistic practices by big-time business groups would have an impact in the impending merger being hatched by leading telecommunications firms, Philippine Long Distance Telephone Co. (PLDT) with rival Digitel Telecommunications (Digitel).

Economic managers along with the National Telecommunications Commission (NTC) were previously ordered by President Aquino to look into all the possible consequences that may develop in the event PLDT and Digitel push through with the merger following the complaints lodged by Globe Telecom.

Until now, however, Malacañang has yet to update media on the results of the supposed study and whether or not Aquino has made a decision in response to the concerns raised by Globe Telecoms insofar as the state of competition among the industry players is concerned.

Presidential Communications Development and Strategic Planning (PCDSP) Secretary Ramon Carandang said he is uncertain whether EO 45 which empowers the Department of Justice (DoJ) to act as “Competition Authority” would have an effect in the looming PLDT-Digitel merger.

“I’m not sure if that particular EO will have an impact on the merger. We’re still trying to figure out how to respond to that. Again, let me bring up the issue we raised before: Will it have negative impact on consumers? Will it have a negative impact on the competitive environment in the telecoms industry? Those were the issues we’re looking at right now and we’re going to make a decision based on that,” Carandang told reporters during a press briefing.

Aquino through his EO 45 has mandated the DoJ to “investigate all cases involving violations of competition laws and prosecute violators to prevent, restrain and punish monopolization, cartels and combinations in restraint of trade.”

Carandang said this particular order aims to strengthen the Aquino administration’s campaign against monopoly, cartel, and other anti-competitive practices that weakens the country’s business environment.

“It (EO 45) is just one of many things — I know there are pending bills in Congress — which seek to address also anti-monopolistic practices. So this is all part of what is going to be different measures, different policies put in place in order to maintain a level playing field,” explained Carandang.

Globe’s primary argument in opposing the impending merger between PLDT and Digitel is that it might result in a lopsided distribution of communication frequencies thus making the competition among telecom-munications industries unhealthy.

EO 45 failed to specify the industries it would cover but Carandang assumed that the order would generally “apply to all situations, whether maybe accusations or suspicions of monopoly or cartel behavior.”

Interestingly, it is the NTC, not the President, that is empowered to settle the issue between PLDT and Globe, and this new EO comes after Globe’s letter to the president signed by Globe chairman, Jaime Augsto Zobel seeking the awarding of the frequency, which should be auctioned by the NTC and not awarded by the president.

Carandang also said that while DoJ serves as the lead agency in this particular endeavor, other government institutions such as the Department of Trade and Industry and other economic agencies are expected to participate in determining situations where monopoly and cartel exist.

“The DoJ will handle one aspect to that which is the legal aspect. There are the economic and the industry aspects as well — the competitive aspects, there’s the consumer aspect. So the decision whatever it may be will have to be done based on a more holistic approach,” Carandang explained.

“We cannot look at it based purely on legal (aspects), so it’s an interagency decision, the concerned Cabinet agencies will be weighing in on these issues,” he added.

EO 45 has mandated the DoJ to “enforce competition policies and laws to protect consumers from abusive, fraudulent, or harmful corrupt business practices and monitor and implement measures to promote transparency and accountability in markets.”

DoJ is also tasked to “supervise competition in markets by ensuring that prohibitions and requirements of competition laws are adhered to, and to this end, call on other government agencies and/or entities for submission of reports and provision for assistance.”

Moreover, the DoJ under the same order carries the responsibility of preparing, publishing and disseminating studies and reports on competition to inform and guide the industry and consumers as well as promote international cooperation and strengthen Philippine trade relations with other countries, economies, and institutions in trade agreements.

EO 45 also created the Office for Competition under the Office of the Secretary of Justice to carry out the duties and responsibilities set forth in the Section 1 of EO 45. It shall be manned by such number of staff including legal and technical experts, consultants and resource persons to effectively and efficiently pursue its mandate."

DOJ empowered to act against competition violators

"EO 45 empower DoJ vs violators of 'competition laws'"

by Aytch S. de la Cruz

Published 16 June 2011, The Daily Tribune Online

(Original article available here).

"Malacañang yesterday released Executive Order (EO) 45 which empowers the Department of Justice (DoJ) to act as “Competition Authority” that would “investigate all cases involving violations of competition laws and prosecute violators to prevent, restrain and punish monopolization, cartels and combinations in restraint of trade.”

Under the latest EO, the DoJ is also mandated to “enforce competition policies and laws to protect consumers from abusive, fraudulent, or harmful corrupt business practices and monitor and implement measures to promote transparency and accountability in markets.”

The DoJ is also tasked to “supervise competition in markets by ensuring that prohibitions and requirements of competition laws are adhered to, and to this end, call on other government agencies and/or entities for submission of reports and provision for assistance.”

Moreover, the DoJ under the same order carries the responsibility to “prepare, publish and disseminate studies and reports on competition to inform and guide the industry and consumers; and promote international cooperation and strengthen Philippine trade relations with other countries, economies, and institutions in trade agreements.”

An Office for Competition under the Office of the Secretary of Justice is also created to carry out the duties and responsibilities set forth in the Section 1 of EO 45. It shall be manned by such number of staff including legal and technical experts, consultants and resource persons to effectively and efficiently pursue its mandate.

Justice Secretary Leila de Lima is therefore given the authority to designate the chief/head and members of the Office for Competition.

“To carry out the provisions of this Order, initial funds for the operations of the Office for Competition shall be taken from the available funds of the DoJ. Thereafter, such amount as may be deemed necessary for the annual operations of the Office, shall be incorporated and included in the annual budgetary appropriations of the DoJ,” EO 45 stipulated further as regards to the funding for the new office.

EO 45 was signed by President Aquino on June 9 and shall take effect immediately upon its publication in newspapers of general circulation."

DOJ to act as competition authority

"DOJ to serve as 'competition authority' on domestic, international trade"

Sun Star Online, 16 June 2011

(Original article available here).

"MANILA -- Malacañang has designated the Department of Justice (DOJ) as the country’s “Competition Authority” to ensure fair domestic trade, as it pushes for antitrust measures that will curb monopolies, break-up cartels, and eliminate other abusive practices in business.

By virtue of Executive Order (EO) 45, Malacañang recognizes the need to promote competition and level the playing field in the market to encourage needed investments and safeguard the interest of the general public.

The order was signed by President Benigno Aquino III on June 9, 2011.

“The 16-point Agenda of the administration provides that this will be a government that creates conditions conducive to the growth and competitiveness of private businesses, big, medium, and small,” Executive Secretary Paquito Ochoa Jr. said in a statement.

“The President’s policy, as he had stated during his first State of the Nation Address, called for measures that will allow and guarantee fair competition,” he added.

Under the EO, the DOJ is tasked to investigate all cases involving violations of competition laws and prosecute violators to prevent, restrain, and punish monopolization, cartels, and combinations in restraint of trade.

The DOJ is likewise ordered to enforce competition policies and laws to protect consumers from abusive, fraudulent, or harmful corrupt business practices; and supervise competition in markets by ensuring that prohibitions and requirements of competition laws are followed.

The DOJ is also tasked to monitor and implement measures to promote transparency and accountability in markets; as well as prepare, publish, and disseminate studies and reports on competition to inform and guide the industry and consumers.

The justice department is also charged to promote international cooperation and strengthen Philippine trade relations with other countries, economies, and institutions in trade agreements. (Jill Beltran/Sunnex)"

Pnoy designates DOJ as competition authority

"Aquino designates De Lima as competition authority"

GMA News Online, 15 June 2011

(Original article available here).

"President Benigno Aquino III has designated Justice Secretary Leila de Lima as the country’s competition authority tasked to prevent monopolies, cartels and protect consumers from abusive business practices.

In Executive Order 45 signed June 9, Aquino created the Office for Competition under the Department of Justice (DOJ), citing the need to promote competition and level the playing field in the market

According to the EO, De Lima was chosen for the task because she is the principal legal counsel and prosecution arm of the government, and also the central authority for matters requiring international legal cooperation.

“The DOJ likewise serves as the principal agency mandated to enforce the rule of law and investigate and prosecute offenders," the EO stated.

Being a competition authority, De Lima is tasked to investigate all cases involving violations of competition laws and prosecute violators to prevent, restrain and punish monopolization, cartels and combination in restraint of trade.

She will also enforce competition policies and laws to protect consumers from abusive, fraudulent, or harmful corrupt business practices.

It will also be her job to supervise competition in markets by ensuring that prohibitions and requirements of competition laws are adhered to, and to this end, call on other government agencies and/or entities for submission of reports and provision for assistance.

She will need to monitor and implement measures to promote transparency and accountability in markets.

De Lima is also tasked to prepare, publish and disseminate studies and reports on competition to inform and guide the industry and consumers and promote international cooperation and strengthen Philippine trade relations with other countries, economies, and institutions in trade agreements.

President Aquino also signed on June 3 Executive Order 44, which expands a public-private sector task force in charge of addressing investor issues in fresh bid to improve the global competitiveness of the Philippines.

In a press statement Wednesday, Executive Secretary Paquito Ochoa Jr. said EO 44 is a step toward enhancing the competitive ranking of the country while strengthening the local industries.

“The government and the business sector have the shared aspiration to jointly address the competitiveness indicators that will impact on our international competitiveness ranking and strengthen our industries, agriculture and service sectors, and thereby create more jobs and increase income," Ochoa said.

The President’s order renames the Public-Private Sector Task Force on Philippine Competitiveness, established on October 5, 2006, to National Competitiveness Council (NCC). The council is attached to the Department of Trade and Industry (DTI) and will report to the Cabinet’s Economic Development Cluster.

EO 44 beefs up the NCC with the inclusion of the heads of the Department of Energy (DOE) and the Department of Tourism (DOT). Other members are the secretaries of DTI and the Departments of Finance and Education, director general of the National Economic and Development Authority, and five representatives from the private sector.

Ochoa said the President deemed it important to include the DOE secretary in the joint panel in view of the rising cost of power that dulls the country’s international competitiveness.

“The DOT is included in the NCC in recognition of the fact that the development of the tourism industry holds the greatest potential for job creation and generation of additional revenues for the government," he said.

Under EO 44, the NCC serves as a primary collection point of investor issues that need to be addressed in order to improve international competitiveness in the industry, services and agricultural sectors.

The council will advise the President on policy matters affecting the competitiveness of the business sector and provide inputs to the Philippine Development Plan, the Philippine Investments Priority Plan and the Philippine Exports Priority Plan.

Part of the NCC’s task is to coordinate, monitor and ensure the implementation of key policy improvement processes associated with international competitiveness, as well as recommend legislation that may contribute to further boost competitiveness.

Designated to head the NCC was Trade Secretary Gregory Domingo with a private sector representative, to be appointed by the President, as co-chairperson. The five representatives from the private sector will have a term of two years.

The DTI-Center for Industrial Competitiveness serves as the NCC Secretariat to be headed by its executive director, with the support of a private sector staff headed by an operations director.

The EO earmarks P5 million, which will be drawn from the contingency fund of the Office of the President, for the operating expenses of the NCC. Subsequent annual funding of the council will be incorporated in the regular budget of the DTI and subject to existing accounting and auditing laws and regulations, while the private sector shall provide funding for its own activities. — Amita O. Legaspi/KBK, GMA News"