SEN. VILLAR CALLS FOR THE PASSAGE OF AN ANTITRUST LAW (PART 1)

"Time to pass an antitrust law"
by
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."

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?"

BusinessWorld Anti-Trust Commentary - COMPLETE

Published May 25 and 26, 2011 in BusinessWorld

Also available here and here

Proposed antitrust law to level the playing field

"Level playing field"

The Business Mirror Editorial

Published 24 May 2011 in the Business Mirror

(Original article available online here)

"Up for deliberations by the Senate this week is a proposed antitrust law that its chief proponent, Senate President Juan Ponce Enrile, has promised “will bite; it has fangs.”

The need for such a law was emphasized by Enrile himself just a few weeks ago when he responded to a query if the recent megadeal between the leading telco firm and the third largest in the industry violated any law: “We have an anti-trust law in the Revised Penal Code, but it is a dead law. Without a law, there’s no crime committed.”

The Competition Act of 2011, of course, is anchored on solid ground, namely, the Constitution: “The State shall regulate or prohibit monopolies when the public interest so requires and that no combinations in restraint of trade or unfair competition shall be allowed.”

The Enrile bill enumerates three categories of unfair trade practices: cartelization; monopolization; and abuse of monopoly power, which includes predatory behavior toward competitors; price fixing, bid rigging, limitation and control of markets, market allocation, arrangements to share markets or sources of supply and price
discrimination.

Other unfair trade practices under the Enrile bill are the distribution of false or misleading information capable of harming the business interests of another firm, and the unauthorized receipt, use, or dissemination of confidential scientific, technical, production, business or trade information.

Perhaps, what Enrile meant by his bill definitely having “fangs” and not likely to be ignored is the provision on penalties for violations.

The proposed antitrust law, in fact, goes for the jugular, or rather, where it hurts most—the pockets—as it seeks to impose very stiff penalties on violators. Each and every violation shall be punishable by a fine of not less than P10 million but not exceeding P50 million, if a natural person; a fine of not less than P250 million but not exceeding P750 million if a firm; imprisonment not exceeding 10 years, or both, at the discretion of the court.

Businessmen would definitely think twice about losing at the very least P10 million. How much more if the government demands P750 million for unfair trade practices?

Apart from expanding the coverage of unfair trade practices, the Enrile bill also seeks to strengthen the power of regulatory authorities to go after violators, with the Department of Justice (DOJ) and the Department of Trade and Industry (DTI) as its chief enforcers. The DOJ and the DTI can, on their own, initiate preliminary inquiries to enforce the law upon filing of a verified complaint by an interested party.

Enrile is correct in pointing out that “the increased deviousness and complexity of schemes in perpetuating monopolies in the free-market landscape” requires “equally sophisticated legislation” that would protect the public from price manipulation and other unfair trade practices.

By strengthening the government’s hand in dealing with unfair trade practices, the antitrust bill paves the way to a level playing field in Philippine business.

The Senate should, therefore, pass the bill as soon as possible after proper consultations with all stakeholders.

The Competition Act of 2011 will benefit the entire economy because it will encourage fair play. Unfair trade practices, after all, stunt economic growth and discourage new investments.

It should be passed into law because, in the end, Big Business is not necessarily good business."

Senate to deliberate on anti-trust bills

"Senate set to deliberate antitrust bill next week"

by Butch Fernandez

Published 18 May 2011 in Business Mirror

(Original article available online here)

"The Senate moved to speed up floor deliberations on a new Anti-Trust Law that its chief proponent, Senate President Juan Ponce Enrile, said would add more “fangs” to existing regulations, penalizing unfair trade and uncompetitive practices, including cartels, monopolies, abuse of dominant position, predatory pricing, bid-rigging and price-fixing.

“This [new Anti-Trust Law] will bite; it has fangs,” Enrile told editors and reporters of the BusinessMirror, the Philippines Graphic and dwIZ in a breakfast press conferences on Wednesday.

Enrile explained that the proposed Competition Act of 2011, embodied in Senate Bill (SB) 1 that he and Senators Ralph Recto and Antonio Trillanes IV co-authored, was meant to plug gaps in the existing Anti-Trust law, which, Enrile noted, was “not as sharp.”

According to Enrile, a consolidated bill, incorporating related proposals filed by other senators, is due to be reported by Sen. Manuel Villar, chairman of the Committee on Trade and Commerce, for floor deliberations next week.

Apart from penalizing unfair trade and anti-competitive practices in restraint of trade, unfair competition and abuse of dominant power, SB 1 also seeks to strengthen the powers of regulatory authorities to go after violators, with the Department of Justice (DOJ) and the Department of Trade and Industry (DTI) as its chief enforcers.

As proposed by Enrile, persons found violating the law face fines ranging from P10 million to P50 million, while erring companies would be fined from P250 million to P750 million, plus 10-year imprisonment.

The proposed legislation also gives regulatory agencies the power to impose fines ranging from a minimum of P100, 000 to P5 million (for a person) and from P5 million to P50 million (for a company) for each violation.

Under the bill, the DOJ and the DTI shall, on their own, initiate preliminary inquiries to enforce the law upon filing of a verified complaint by an interested party.

The bill, however, also sought to protect confidentiality of information submitted in connection with the enforcement of the law, by providing that any document submitted or marked confidential by the DOJ, relevant to an investigation, shall not be disclosed, published, copied or disseminated. It also includes immunity from suit to any firm or person who will cooperate with authorities and give information to the DOJ.

“Our people have been victims to big business. It behooves the Senate to provide protection to our people against price manipulators,” Enrile said in his explanatory note to the bill. “In a volatile economic situation, such as that which we are experiencing now, it is not very difficult to imagine how artificial prices in one or two commodities is able to directly or indirectly raise the prices of related goods and services.”

Enrile cited Article XII, Section 19, of the Constitution, which provides that “the State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.”

“As proof of the importance of this Constitutional mandate, Section 22 of the same article encourages the promulgation of legislation that would impose civil and criminal sanctions against those who circumvent or negate this principle,” the senator said. “Hence, Section 22 of the Constitution 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.”

While previous legislations have been passed pursuant to this Constitutional mandate, Enrile noted “the increased deviousness and complexity of schemes in perpetuating monopolies in the free-market landscape necessitates an equally sophisticated legislation that would effectively address this concern.”

“Generally, this bill penalizes combinations or conspiracies in restraint of trade and all forms of artificial machinations that will injure, destroy or prevent free-market competition,” Enrile added."

Greater call for anti-trust law!

"Think tank renews call for anti-trust law "
by Daxim Lucas
Published in the Philippine Daily Inquirer on 22 May 2011
(Original article also available online here).

"MANILA, Philippines—Mergers and consolidations lead to the concentration of market power in a few corporations—a situation that serves as a fertile breeding ground for restrictive business practices that stifle competition and disadvantages consumers, a private think tank said.

More importantly, Forensic Law and Policy Strategies Inc. (Forensic Solutions) pointed out that international mergers pose the biggest threat to developing economies like the Philippines, where anti-trust laws are largely absent to guard against the abuses that could result from such corporate unions.

Forensic Solutions, which is headed by former Justice Secretary Alberto Agra, said the lack of adequate Philippine laws on mergers and other corporate mergers should prompt Congress to pass a new legislation to check against possible abuses.

The latest policy paper, which Agra co-wrote with banking law expert Faye Josephine Miguel Rañola, recommended the crafting of a law calling for review of proposed mergers and the setting up of a threshold above which a corporate merger will be classified as monopolistic.

“Arrangements that do not comply with fair competition guidelines and those that significantly limit competition should not be allowed,” Agra said in the policy paper “Competition Laws in the Face of the Merger Wave.”

Forensic Solutions also said the SEC should be allowed to take remedial action, and impose penalties and sanctions against existing merged corporations that were engaged in anti-competitive practices.

It also proposed the simplification of the current legal mechanisms available to interested parties for them to obtain relief or file injunctions against questionable mergers without going through a protracted litigation process.

The enactment of such laws are necessary, they said, to ensure unfettered competition in local industries and position the Filipino consumer as the “supreme arbiter” in a free market that yields the highest quality of good and services at the lowest prices possible.

Forensic Solutions made this call for new anti-trust legislation at a time when the current trend is toward the privatization and deregulation of vital industries, with governments increasingly ceding state control over economic activities to private businesses.

There are pending bills in Congress addressing certain aspects of corporate mergers.

One of them is Senate President Juan Ponce Enrile’s Senate Bill No. 123, which penalizes combinations or conspiracies in restraint of trade and all forms of artificial machinations that will injure, destroy or prevent free market competition.

The Enrile bill also prohibits stock or asset acquisitions, grant of proxies or voting rights, and board membership in two or more corporations that have the effect of substantially reducing competition or tending to create a monopoly."

People's Journal responds to Nestle

"Black coffee, anyone?"
by Willie S. Baun, PEOPLE'S JOURNAL, Streetlights, 14 April 2011
(Article hit the stands on 14 April 2011; original article available online here)

"PEOPLE who have been keeping their ears to the ground at the premises of Nestle Phils., Inc. in Rockwell, Makati are likely to hear rumblings in today’s meeting of the giant multinational food and beverage company’s stockholders not only here but all the way in a town by Lake Geneva in Switzerland.

What’s brewing, to shift to a familiar metaphor, is primarily the issue of predatory pricing filed against NPI by two of its long-time distributors, Service Edge and FDI Forefront.

Since the issue broke out in the open months ago, NPI sources said, there has been a flurry of communications from top honchos of the Swiss firm’s headquarters to its execs here. They are reportedly not pleased with how the issue has been handled by NPI and its legal teams.

Charges filed against NPI with state regulatory agencies cite the company for allegedly compelling its distributors to lower their prices – regardless of their operating costs, interest charges, and taxes. Consequently, some of them lost heavily and have had to lay off personnel. One of them has gone bankrupt.

Affected distributors have also filed criminal complaints of perjury at the Quezon City and Makati City courts against top NPI executives, two of whom have managed to sneak out of the country, thanks to the short arm of our law and justice system.

Is it true that one of the fugitive execs is now a member of the Nestle executive board in Switzerland while the other has been given a plum assignment in the United States? If so, nothing pays like predatory pricing does, indeed.

So, it may well be the creamer, as it were, of choice for the Nestle brew involved in yet another case. Tycoon Henry Sy’s Banco de Oro has likewise sued NPI for allegedly false and deceptive testimony.

Streetlights came out with this earlier, to which a rejoinder was supposed to be forthcoming two weeks ago. It did finally last Monday (PJ Editorial, April 11) but only to “celebrate” the NPI’s fealty to corporate social responsibility across 100 years, all of a century, of business in the country.

PJ sportingly joined NPI, and so does Streetlights to wit:

“But possibly its more significant exercise in this regard (CSR) is its commitment to work with the Department of Agriculture, the Land Bank of the Philippines and Banco de Oro, to infuse more pep in the country’s coffee industry.

“This supposed to pour some P3 billion into the venture, a major portion of which will reportedly be used to provide loans to coffee farmers in the country.

“For this, we say, ‘Cheers’. Let’s drink to that, and not with any alcoholic concoction, but with Nescafe, perhaps?” Heck, you can make that “with Nescafe, for sure,” and I wouldn’t mind because it’s been a fact of this old fogey’s life thrice a day for more than the years he can instantly remember.

In the meantime, it comes as no surprise to learn that this matter of multinational company brushes versus fair trade rules has not escaped the attention of the Senate. Yeah, that of the Senate President – Manong Johnny – who, since 2008 has been pushing for Anti-Trust legislation precisely to preempt foreign firms’ bullying of their local partners.

Black coffee time to sober up, Jose, and so is it for anyone who mistakenly believes corporate hooligans can only be from Nestle."

Anti-trust bills gain momentum

Excerpt from ANGEL THOUGHTS column by DeeDee M. Siytangco, Manila Bulletin, 11 April 2011.
(Original and full article hit the stands on 10 April 2011, and is available online here).

"Given this, in light of recent headlines, anti-trust supporters have been handed the perfect opportunity to promote their cause. As a concept, anti-trust has been discussed and debated in the Philippines for years, going back to the Marcos era when monopolies were rampant.

In 2008, Senate President Juan Ponce Enrile already proposed Senate Bill 123, otherwise known as the anti-trust act, but to date, nothing concrete has come out of it. We don’t have an anti-trust law that will prevent “pacman-type tycoons” gobbling up business in all sectors – telecoms, infrastructure, medical centers, media, among others. In Asia, we are only one of two countries without this law!

It’s only now that we are beginning to realize how this anti-trust thing can actually affect our livelihoods, job securities, income opportunities, and even our ability to make text messages and calls on our cellphones free of charge!

Lately, a number of giant corporations have been under the anti-trust spotlight, and the discussions have finally been brought to a level that the man-on-the-street can relate to."

To the point: predatory pricing

Appeared in "To The Point" column, Manila Standard Today, by Emil Jurado, on 11 March 2011

"There’s this case filed recently by two Filipino-owned companies against a giant multinational company whose products the local firms distribute. The case bears watching. Service Edge Distribution Inc. and FDI Forefront II Trading Corp. sued Nestle for predatory pricing and perjury.

Predatory pricing is selling one’s products at very low prices to put competitors out of business or discourage them from entering the market. In this case, Nestle allegedly forced SEDI and FDI II to sell products at controlled prices, way below the actual cost of distributing the product, with threat of termination of contract if they failed to do so.

Santa Banana, it’s bad enough to take a low blow against competition. To do something like this to one’s own distributors is one for the books!

The case of perjury involves four top executives of the multinational company who allegedly presented false testimonies as evidence in their counter-affidavits to the complaints filed against them.

Cases such as these that involve not-so-aboveboard practices of some multinational companies doing business in the Philippines give urgency to the passage of an anti-trust law that will protect small and medium enterprises that are owned and managed by Filipinos.

In the Senate, pending are Bill 123 by Senator Serge Osmeña, Bill 1838 by Senator Miriam Defensor Santiago and Resolution 123 by Senator Manny Villar. These call for an inquiry into cartels and monopolies. There is another measure by Senate President Juan Ponce Enrile that prohibits price-fixing and price discrimination.

Representing the private sector in the Senate inquiry is lawyer Lorna Patajo Kapunan, who has brought public attention to the way some multinationals, for the longest time, have taken advantage of the absence of an implementing law that will stop their underhanded practices."

Also available online here.

Supermarket association attends Senate anti-trust public forum

"PAGASA at Senate Committee on Trade & Commerce"
By Wave Technologies, Inc., originally published 10 February 2011, at the Philippine Amalgamated Supermarket Association Incorporated website here.


Atty. Lorna Kapunan at the podium (Image from PAGASA site here)

"PAGASA [Philippine Amalgamated Supermarket Association Incorporated] was invited as an observer at the Senate Committee on Trade & Commerce, Committee on Economic Affairs and Special Oversight Committee on Eco. Affairs’ Lecture Forum: “Understanding Antitrust.” At the podium is Atty. Lorna P. Kapunan with her critique on existing and fragmented legislations on antitrust. Other presenters were DTI Usec. Zenaida C. Maglaya and Ateneo’s Atty. Anthony Abad. The forum was headed by Senate Pres. Juan Ponce Enrile and Senator Manuel Villar."

Highlights of proposed anti-trust bills

"Anti-trust"
by Ducky Paredes
Originally published in Malaya, 04 March 2011, BUSINESS INSIGHT.

"AFTER years of futile attempts, Congress seems to have generated the political will to enact an anti-trust law that would curb the abuses of big business, particularly giant foreign multinational companies that have been getting away with monopolistic and unfair trade practices.

Recently, the Senate Committee on Trade and Commerce held a forum for the discussion of laws aimed at preventing monopolies, combinations in restraint of trade, abuse of dominant power, and unfair competition practices.

The committee invited resource persons from the government and the private sector. They provided valuable inputs and shared their insights on prevailing anti-trust practices. Among them were Undersecretary Zeny Maglaya of the Department of Trade and Industry (DTI), lawyer Anthony Abad of the Ateneo Center for International Economic Law and consumer advocate Lorna Patajo-Kapunan, who is also a prominent law practitioner.

In particular, Kapunan made a presentation that, among other things, provided clear examples of the unfair trade practices of a foreign multinational that drove several of its Filipino distributors to bankruptcy, resulting in huge financial loses that forced them to lay off hundreds of employees.

Kapunan deplored the weaknesses, ambiguities and inadequacies of current laws "that not only subject our local businessmen to bullying and exploitation but actually encourage these practices because of the leniency of existing legislation."

She pointed out that the bullying behavior of large corporations exerts negative effects on the economy. "Just look at these distributors. They are entrepreneurs who were financially wiped out due to unethical business practices of their principals. Businesses have collapsed, jobs have been lost and many lives have become miserable. That is why we need carefully worded and well-crafted anti-trust legislation,’’ said the lady lawyer who has been engaged in a continuing and sustained campaign for the passage of such legislation.

Lucky for us consumers, as well as for these distributors, key members of the Senate are hot on enacting the needed laws. Precisely for that purpose, Senate President Juan Ponce Enrile filed Senate Bill 123, with Senators Ralph Recto and Antonio Trillanes as IV as co-authors.

Similar bills were also filed by Senator Miriam Defensor-Santiago (S. B. 1838), Sergio Osmeña III (S. B. 150), and Senator Panfilo Lacson (S. B. 1600). Senator Manny Villar has also sponsored Proposed Senate Resolution 123 urging inquiry into cartels and monopolies.

Similar measures have also been filed in the House of Representatives.

The most recent is a bill (in substitution of 12 other similar bills) by Cagayan Congressman Jackie Ponce-Enrile, with Cagayan de Oro City Congressman Rufus Rodriguez as main sponsors with more than 70 other co-authors.

The bill would create an independent Philippine Fair Competition Commission to regulate trade practices, promote ethical business conduct in the country and implement the national policy on fair trade competition. It would penalize anti-competitive agreements, abuse of dominant power and anti-competitive mergers.

So what exactly is an anti-trust law? It is one that aims to prevent the emergence of trusts which come in the form of "mergers, acquisition of control, or any act whereby companies, partnerships, shares, equity trusts, among others.

Assets are concentrated among competition, suppliers, customers or any other business entity." Such a situation is considered inimical to public interest as they usually lead to the rise of unlawful monopolies, combinations in restraint of trade, and unfair competition practices.

A monopoly emerges when a certain type of business or industry is concentrated in one group or in the hands of a few. It prevents the existence or the emergence of competition and can result in the control of prices, or the production and distribution of certain goods and commodities. Hence, even legitimate mergers of companies or business consolidations can lead to monopolies.

Combinations in restraint of trade, on the other hand, refer to "an agreement or understanding between two or more persons, in the form of a contract, trust, pool, holding company or other form of association." Its purpose is to restrict competition, monopolize the trading of a certain commodity, and control its pricing, production and distribution. This results in interference in the free flow of trade and commerce, to the prejudice of consumers. Thus is monopoly achieved.

Unfair competition arises when a dominant business resorts to such practices as price manipulation, spreading false information aimed at discrediting competition, monopolizing any merchandise or commodity, or conspiring with other persons to alter the price of certain goods in order to ruin competition and maintain or increase one’s dominance of the market.

Generally, an anti-trust law is intended to harmonize the legal and regulatory system governing the operation of business. It seeks not only to promote the welfare of consumer but also to prevent giant business firms from bullying and exploiting weaker and undercapitalized businesses, particularly the so-called SMEs or the small and medium enterprises.

Anti-trust legislation is anchored on provisions of the Philippine Constitution, particularly Sections 19 and 22 of Article XII. Section 19 provides that "The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed."

On the other hand, Section 22 calls for the enactment of laws that would impose civil and criminal penalties against parties who violate the prohibitions. This provision specifically states: "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."

Why are others so eager to call for amendments to our constitution, when we have not yet even touched some of the tasks that it mandates for the State?"

*Original article also available online here.

Proposed competition measures seeks to protect small enterprises

"Proposed competition measure seeks to protect small enterprises"
by Ritchelle Alburo, PHILEXPORT News and Features
Originally published in the Philippine Exporters Confederation, Inc.'s site here.

"6. Proposed competition measure seeks to protect small enterprises

A recent proposed legislative measure on competition responds to a glaring need to address unfair competitive practices to the disadvantage of micro, small and medium-scale enterprises.

While protection of consumers from unreasonable pricing has been the rationale for the enactment of many of the country’s competition-related laws, Senate Resolution No. 123 of Senator Manny Villar seeks to operationalize fair market principles and discourage monopolies to allow MSMEs to participate in the growth of the economy.

Atty. Lorna Patajo-Kapunan of Capunan Lotilla Garcia & Castillo Law Offices was very pleased with said bill.

I would like to thank Senator Villar for recognizing the need to protect the MSMEs, said Kapunan, during a forum on Understanding Anti-trust held yesterday at the Philippine Senate, mentioning that many of the country’s small enterprises are disadvantaged by the restrictive agreements and arrangements of giant companies.

These restrictive agreements, as cited by Anthony Abad of Trade Advisory Services during said forum, include price-fixing, collusive tendering, market or customer allocation, sales or production restraints, concerted refusal to purchase or to supply and collective denial of access to an arrangement or association that is crucial to competition.

Aside from SB No. 123, there are four other proposed measures on competition in the Senate. These are SB No. 1 authored by Senator Ponce Enrile, SB No. 175 of Senator Anthony Trillanes IV, SB No. 123 of Senator Sergio Osmena III, and SB No. 1838 of Senator Mirriam Santiago.

Many of these bills seek to respond to the need to codify existing competition laws and come up with a comprehensive competition law that is workable and effectively deters anti-competitive practices.

Kapunan noted that Senate Bill No.1 of Senator Ponce “defines with particularity prohibited acts constituting monopolization and cartelization”.

By increasing the penalty for violation of Article 186 of the Revised Penal Code, Kapunan likewise intimated that SB No. 1838 will serve to deter the anti-competitive measures.

SB No. 1838 seeks to increase the number of years of imprisonment from the current six months to six years and the fine from P200 to 1,000,000.

To effectively enforce a competition law and achieve its desired outcome, Atty. Geronimo Sy of the Department of Justice laid emphasis on the need to fine-tune the evidentiary architecture of competition bills, citing that despite sectoral regulation of basic commodities, such as sugar, tobacco and rice, prices of the same remain prohibitively high, due mainly to the difficulty in providing sufficient evidence demonstrating violation of competition-related laws. -- Ritchelle Alburo, PHILEXPORT News and Features"

Enrile backs anti-trust forum

"Enrile backs anti-trust forum"
Original article published in Malaya, 02 March 2011, NATIONAL & METRO NEWS, p. B3

Click on image to enlarge and view full article.

Anti-trust bills timely

"Anti-trust bills timely"
by Willie S. Baun
Originally published in People's Journal, 01 February 2011, STREETLIGHTS, p. 4

"Multinational companies, particularly those dealing in "fast-moving goods," have enjoyed an array of privileges that otherwise would not be available to them, not even in their own countries.

What makes the FMCGs so profitable in the domestic market, apart from the usual bias for the "imported," is the participation of local distributors.

Numerous small enterprises take on the difficult job of bringing the FMCGs to the buying public, and set their profit margins based on standard retail prices and bulk-discount costs.

In effect the MNC plays commissary that merely takes care of administrative matters but somehow gets the lion's share of the income earned by the distributors.

'In and of itself,' observed a trade official, 'this is already a rather one-sided business deal.' It was added when flagrantly abused by a giant MNC to the graver prejudice of the distributors - the alarm bells should ring against anti-trust.

Two distributors in particular claim to have fallen under the mercy of one such MNC due to its alleged predatory pricing in direct conflict with the corporate codes enforced by the Department of Trade and Industry.

As this case wider currency in business circles, so has "Anti-Trust" attained buzzword standing. Soon enough, I believe, Senate President Juan Ponce Enrile and Sen. Miriam Defensor-Santiago would be asked to include FMCG distributors and other such outsource companies in appropriate bills they have proposed.

Legal proceedings between the MNC and the distributors showed the multi-national may have perjured. That, moreover, the MNC's counter-affidavits and joint counter-affidavits versus the predatory pricing charge are inconsistent with one another and with the facts of the matter at bar.

When their attention was reportedly called, the MNC executives seemed unmindful of the resulting perjury charges. 'Their rebuttals were at best amusing, and, at worst dismissive. Yeah, as in 'we didn't know or realize we were lying!''

They also posited that 'privilege' and 'right' were synonymous and took issue with the distributors for the focusing on semantics. Cited in the MNC's defense, the Webster's Encyclopedic Dictionary defined 'privilege' as a 'right, immunity, or exemption only by a person beyond the advantages of the most.'

On the other hand, Black's Law Dictionary, the authority on legal terms and legal definitions, indicates 'privilege' as a 'particular and peculiar benefit or advantage enjoyed by a person, company, class, beyond the common advantages of other citizens.'

Common sense, of course, tells us that a right is inherent while a privilege is bestowed. Then again, there's no guarantee that common sense is precisely what it says it is.

In any case, here's Mr. Webster just once more; Anti-trust, adj., Pertaining to the regulation of or opposition to trusts, cartels, pools, monopolies, and other organizations and practices in restraint of trade.

So there, Jose, and trust JPE and Miriam to get it right all the way."

Senators at anti-trust public forum

Image source: Philippine Senate official website/ PRIB Photo by Albert Calvelo/ 10 February 2011

"ANTI-TRUST FORUM: Senate President Juan Ponce Enrile, together with Sen. Manny Villar, chair of the committee on Trade and Commerce, attend the second day of “Understanding Anti-Trust”, a forum presented by the Committees on Trade and Commerce, Economic Affairs and the Special Oversight Committee on Economic Affairs. Also in photo is Senate Deputy Secretary for Legislation, Atty. Edwin B. Bellen. (PRIB Photo by Albert Calvelo/10 Feb 2011) "
(Original photo release with text appears here).

*Resource speakers for the Senate anti-trust public forum were Usec Zenaida Malaya of the Department of Trade and Industry, Atty. Anthony Abad, and Atty. Lorna Patajo-Kapunan.

Gaining momentum - the crusade for better anti-trust laws

"Anti-trust laws" by Ducky Paredes.

Published 22 February 2011 in Malaya. (Original article also appears online here).

"IT’S good to know that not everyone in the Senate is taken up by the investigation into the corruption in the military. While that is also important, the reality is that this investigation may just eventually peter out and, as a lot of other legislative investigations "in aid of legislation" have gone, this one could still go the way of a lot of similar investigations that never even merited an official report in the files of the Senate or the House, much less any attempt at legislation that could cure what was investigated.

Hopefully, these will lead to a time when we will be proud of an uncorrupt military, police and government. For that to happen, however, we would need five of six presidents whose holy grail is the "daang tuwid."

In the event that the one after P’Noy is not committed to taking to the straight and narrow, there goes the PH!

Thus, it is good that the Senate has not placed all of its eggs in that one basket ad that Sen. Manny Villar is trying to pass an anti-trust law through the Committee on Trade and Commerce, which he heads.

This is certainly a welcome development, as the Philippines does not have any comprehensive anti-trust law to protect business owners or consumers.

The Department of Trade and Industry (DTI), the line agency that is tasked to look after trade and business operations, as well as consumer welfare, does not have the legal ammunition to fight unfair trade practices.

This is precisely why the DTI or relevant government agencies have been ineffective in dealing with or prosecuting blatant price fixing by players in certain industries.

The Competition Act of 2010 was proposed by Senate President Juan Ponce Enrile, and co-authored by Senators Ralph Recto and Antonio Trillanes.

The public forum also focused on related bills, namely, SB 123 authored by Sen. Sergio Osmeña III, SB 1838 filed by Sen. Miriam Defensor Santiago and Senate-Proposed Resolution No. 123 by Villar urging the holding of an inquiry on cartels and monopolies. These long overdue proposed antitrust measures seek to penalize unfair trade, anti-competitive practices and the abuse of dominant power by certain institutions – a.k.a. monopolies, cartels and some big, bad MNCs.

During the forum, Atty. Lorna Kapunan, a friend and one of the champions of this issue, presented a critique on existing legislation on anti-trust. She explained that while there are some existing laws that touch on anti-trust, the provisions do not provide clear-cut guidelines or evidence to determine whether an act constitutes unfair competition, monopolistic behavior or restraint of trade.

Speaking from experience, she shared with legislators the fact that some multinational giants often act like bullies and take advantage of the leniency present in the Philippines in order to get away with violations like predatory pricing.

Kapunan bared the ugly truth that it is very hard to do business in the Philippines if you are a Filipino. Given this bitter reality, it is high time we protect the interests of local entrepreneurs simply because SMEs are the backbone of our economy.

Let’s pass stricter laws that will protect the weak – the Pinoy dealers --from the double dealing and bullying multi-nationals that this column has been writing about for the last several years."

ATTY. LORNA KAPUNAN IN "THE MORNING SHOW" TALKS ABOUT ANTI-TRUST

Following her lecture on anti-trust in the Senate Public Forum, Atty. Lorna Patajo-Kapunan appeared as a guest at NBN 4's "The Morning Show" this morning to discuss the plight of Filipino small-to-medium enterprises (SMEs) and Filipino distributors under the existing anti-trust policy in the country.

During the show, which aired live at 7:00 a.m. this morning, Atty. Kapunan spoke of the "bullying" that Filipino SMEs have to endure under existing distributorship agreements with large multinationals (MNCs). She discussed the pending Senate bills on anti-trust as authored by Senators Sergio Osmena III and Juan Ponce Enrile. Atty. Kapunan highlighted the important thrusts of these proposed bills - the setting up of a Fair Trade Commission, a special force to monitor trade violations, and the imposition of higher and stiffer penalties.

Atty. Kapunan also mentioned how agencies like the Department of Trade of Industry has chosen to "wash" their hands off the matter, particularly with respect to a pending case against Nestle Philippines, by passing the buck to the Department of Justice. The litigator pointed out that DTI is the agency with the expertise and mandate to oversee, monitor and ensure compliance with existing trade laws.

Atty. Kapunan further compared our existing anti-trust policy with that of countries like the U.S. and Switzerland, and thanked programs such as "The Morning Show" for highlighting the problem. The host, Veronica Baluyut-Jimenez, urged the public to constantly monitor our legislators, particularly with respect to the proposed anti-trust bills, so that they do not remain merely laws "on paper." Baluyut-Jimenez likened Atty. Kapunan as David going up against Goliath (i.e. large MNCs) and lauded the lady lawyer on her crusade.

The morning news show airs at 7:00 a.m. every day and is hosted by noted broadcasters Veronica Baluyut-Jimenez and Aljo Bendijo.

Standing up for the little guy

"Standing up for the little guy"
Domini M. Torrevillas
From the Stands, Philippine Star, Opinion
February 17, 2011

Please click on picture to enlarge and view full article by Domini Torrevillas on Atty. Lorna Kapunan's crusade for better anti-trust laws.

Full text of article re-printed below:

"By any standard, lawyer Lorna Kapunan is a formidable woman. After graduating from the University of the Philippines College of Law in the late '70s, she embarked on an impressive career that has so far spanned more than three decades. Along the way, she became recognized as one of the leading litigation lawyers in the country, representing several high profile and multi-faceted cases. Her versatility has allowed her to be proficient in several practice areas, including licensing law, franchising, corporate and commercial law, international humanitarian law, family law and estate law and succession.

The thing about Lorna is this: you will never hear her talking about herself. In fact, she may feel somewhat awkward reading the paragraph above Given her remarkable credentials and achievements (including being a Ten Outstanding Women in the Nations Service awardee and a professional lecturer at the European-based International Centre for Legal Studies), many of her colleagues in the profession would be lulled into an overblown sense of self-worth. Lorna, on the other hand, is often heard saying that a person is only as good as the causes that he or she fights for. This is precisely why she currently sits in various boards and voluntary organizations and foundations.

Her latest cause has prompted many to compare her to a proverbial David standing in front of Goliath. Last week, however, Lorna was invited by Senators Juan Ponce Enrile, Manny Villar, Miriam Defensor-Santiago, and other members of the Senate Committee on Trade and Commerce to speak about what she feels is a pressing concern for Filipino entrepreneurs, Small and Medium Enterprise (SME) owners, and consumers in general.

The legislators listened intently as she outlined the unfair practices of some multinational corporations (MNCs) operating in the Philippines, and discussed the lack of legislation protecting Filipinos against these activities.

It turns out that MNCs - by virtue of their size, economic clout, profit-centeredness, or a combination of all three - often act like bullies and take advantage of the leniency present in the Philippines in order to get away with violations. In particular, it is those that are engaged in Fast Moving Consumer Goods (FMCG) that are notorious for this bullying behavior Unfortunately, as Lorna pointed out, this maltreatment of local distributors and the buying public has gone unabated because the government has been powerless to stop it.

'That's the saddest part,' she explained to friends in media later on. 'All we are to some foreign corporations are buyers and end-users. They do not seem to be interested in creating vertical employment, encouraging entrepreneurship, or forging beneficial partnerships with SMEs. It's all about profit, profit, and profit - and the ones getting the very short end of the stick are usually the distributors.'

Apparently, countless Filipino distributors have been literally driven to bankruptcy as a direct result of this so-called 'MNC abuses.' These abuses include baiting prospects with the promise of marketing and promotional support, as well as favorable in-house financing rates. A few months later, however, all support disappears into thin air. Moreover, distributors are suddenly endorsed to a third-party bank for financing (without prior notice), and saddled with rates much higher than agreed upon.

'This is very common,' Lorna said matter-of-factly. 'Now imagine how the problem compounds for the distributors when the MNCs engage in predatory pricing. In order to drive their competition out of the market, certain MNCs compel their distributors to sell goods at irrationally low prices - while keeping the company's margins intact, of course - just to move stocks. They do this in a number of ways: threatening to terminate contracts if quotas are not met, instigating price wars among distributors, or assigning problem accounts directly to their distributors. It's no wonder that they eventually find themselves in a hole they can't get out of.'

But surely the Department of Trade and Industry (DTI) would step in during such instances, right? 'Sadly, no," stated the noted lady lawyer. 'Many distributors have actually filed complaints with the DTI, but they have all received the same reply. Evidently, the agency is fully convinced that cases like these are not within their jurisdiction, if you can believe that.'

The good news is that, according to my reporter-friends, Senator Enrile was especially attentive during Lorna's presentation. Small wonder, considering that Manong Johnny is a principal co-author of Senate Bill No. 3197, or the Anti-Trust Bill. As more legislators hear Atty. Kapunan's invaluable inputs on the topic, this will surely create a critical mass for her crusade.

'Crusade sounds a bit too romantic,' Lorna said with a smile. 'I prefer to think of it as merely standing up for the little guy, and making sure that our fellow Filipinos are not bullied.'

- Domini M. Torrevillas, "Standing up for the little guy", From the Stands, Philippine Star, February 17, 2011