Nestle Philippines gets away with vertical price restraint in the Philippines but NOT in its mother country!!!

It is actually ironic how Nestle Philippines can get away with vertical agreements here in our country when its head office, based in Switzerland, is governed by very stringent anti-trust laws.

In fact, the U.S. even adapts a more liberal approach than Swiss law with respect to vertical price restraint agreements. Vertical agreements are not illegal per se in the U.S., but the court there considers economic effects of such agreements when applying the Rule of Reaosn to determine whether vertical price restraint is anti-competition or not. There is a little more flexibility.

Under Swiss law, vertical agreements are considered threats to competition if those agreements eliminate competition through retail price fixing or minimum retail price imposition. In Switzerland, in applying the Rule of Reason, the Swiss Competition Council has more specific guidelines, and considers both the economic and social impact of vertical price restraint agreements.

Sadly, in the Philippines, we can’t even judge whether our anti-trust law is liberal, like in the U.S., or stringent, like in Switzerland since there is no comprehensive regulation in the Philippines which directly tackles the issue of retail price fixing, minimum retail price imposition, or vertical price restraints. We only know that we are supposed to apply the Rule of Reason as well, but the big question is: How do we apply the Rule of Reason here?

Without a better anti-trust law, companies like Nestle will continue getting away with certain practices here which would otherwise not fly in other countries. Even the hands of our judiciary are tied. Without any guidelines, how will our courts determine what is reasonable or not?

This is why the call for a tougher, stronger, and more comprehensive anti-trust policy in the Philippines is something that should be taken seriously by those people supposedly advocating it. Walk the walk. Otherwise, our country will just continue to be a dumping ground for unfair and illegal practices condoned in other parts of the world.

Lawmakers call for tougher anti-trust law

There has been much noise from our lawmakers on the need for a tougher anti-trust law in the Philippines. Rep. Eduardo Gullas, of Cebu, has been very vocal about pushing for an anti-trust law that would protect both consumers and businesses from wrongful and unfair competition in commerce. Senator Sergio Osmena III and Senator Juan Ponce Enrile have drafted bills for a stronger anti-trust policy and have been holding public forums for greater understanding of our current anti-trust issues. This is no doubt in response to President Noy Noy Aquino’s call for Congress to pass a new anti-trust law in his first State of the Nation Address last July 2010.

It is high time too. In truth, there is no comprehensive anti-trust policy and regulation in the country – at all. While there have been much reforms by way of liberalization, deregularizaton, and privatization to encourage free trade and open markets, anti-trust regulation in the Philippines is unfortunately completely behind compared to our foreign counterparts.

Rep. Gullas has stated that he favors new legislation patterned after the tough anti-trust laws of the United States. Actually, anti-trust laws in European countries such as Switzerland crack down even more than U.S. courts with respect to certain practices. Take the concept of vertical price-fixing, also known as vertical price restraints, which is not unfamiliar in Philippine economy.

The U.S., Switzerland and the Philippines adhere to the Rule of Reason doctrine in determining whether a company is liable for vertical price-fixing. However, the U.S. takes on a more liberal approach whereas Switzerland has more stringent standards and even has a Competition Commission which determines whether there is vertical price restraint involved. In the Philippines, there are no such determinants, and hardly if any case law providing for guidelines on how to apply the Rule of Reason.