ANTI-TRUST CASE AGAINST NESTLE PHILIPPINES

"Impeaching Corona Not Far Behind"

by Emil Jurado 

09 December 2011, To The Point, MANILA STANDARD

(Original article here).

"***

Some businessmen friends recently asked me about the statute of the much ballyhooed proposal for an Anti-Trust Law that would finally give teeth to Article 186 of the Revised Penal Code. This refers to prohibition from 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.

As far as I can recall, the move to have such a law introduced received a boost last August when five top officers of the giant multinational Nestle Philippines Inc. were indicted for violation of Article 186 of the Revised Penal Code. The charges were an offshoot of complaints against Nestle by two of its distributors, Service Edge Distributors Inc. and FDI Forefront 2 Trading Corporation.

The Filipino firms alleged that Nestle engaged in predatory pricing, imposition of inflexible price bulletins that resulted in luge losses to the distributors, unilateral withdrawal of promised marketing support, violation of the terms and eventual termination of the distribution agreement, perjury and offering false testimony in evidence.

I suppose that hearings of the charges against Nestle officials have been scheduled at the Quezon City Regional Trial Court. Resolution of this matter will have an important bearing on the perceived overhearing conduct of multinational firms towards not only their competitors, but even to their own distributors, who are in fact their business partners. Interestingly enough, during the recently concluded Philippine Advertising Congress in Camarines Sur, Nestle Philippines was adjudged Employer of the Year. Well, the company certainly will not win an award of any kind from its distributors who feel they have been wronged.

***

ANTI-TRUST CASE AGAINST NESTLE PHILIPPINES FILED IN RTC QC

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."

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"

POINT OF LAW: ANTI-TRUST WORTHY?

"Is It Antitrust Worthy?"
by
Francis Ed Lim
PHILIPPINE DAILY INQUIRER, Point of Law, 15 September 2011
(Original article available here)

"Since President Aquino mentioned a new antitrust law in his first State of the Nation Address, much work has been done on the antitrust bills filed in Congress.

Legislative hearings have been concluded and proponents say that after decades of waiting (since the Eighth Congress, I’m told), we will finally have a unified, up-to-date and comprehensive antitrust or competition law.  

What are antitrust laws? Antitrust or competition laws are laws that regulate and maintain market competition by prohibiting or regulating anti-competitive behavior. Three acts that antitrust laws normally seek to prohibit are monopolies, cartel-like behavior and abuse of dominant market position.

In an economic sense, antitrust laws are in place to promote a freer market and more open trade, which will result in substantial efficiency and welfare gains for everyone.

A hot topic

The proposed acquisition of Digitel by PLDT has sparked even more interest on an antitrust law for the country. Globe, a competitor, argues that the transaction will lead to PLDT controlling close to 70 percent of the market and will eventually lead to higher prices and rates. However, PLDT and Digitel maintain that the deal will result in continued “unli” benefits, to use telco lingo, for consumers.

Aside from the PLDT-Digitel deal, Nestlé has its own antitrust controversy: Allegedly, it has been engaging in predatory pricing to drive out competition from the market. Expectedly, Nestlé contends that its products are not the cheapest in the market and that competition among lower-priced products remains intense.

Justice Secretary Leila de Lima also had reportedly ordered a review of antitrust cases filed against Fraport AG (Fraport), a German company, and its local partner Philippine International Air Terminals Co. (Piatco), in connection with the Ninoy Aquino International Airport Terminal 3.

Interestingly, perhaps in an attempt to respond to these antitrust controversies, the President issued Executive Order No. 45, which created an Office of the Competition Authority in the Department of Justice, to help enforce our antitrust laws.

Current law

This is not to say that our country has no antitrust laws at all. From myriad sources of law, one can find snippets of an anti-competition framework that serves as some sort of precedent for the current bill.

Foremost is Article XII, Section 19, of the Constitution, which mandates the State to regulate or prohibit monopolies when required by public interest and at all times to prohibit combinations in restraint of trade and other unfair competition practices.

There are implementing pieces of legislation, like the Revised Penal Code which, in Article 186, punishes monopolies and combinations in restraint of trade.

Meanwhile, the Civil Code under Article 28 authorizes the collection of damages arising from unfair competition in agricultural, industrial or commercial enterprises or in labor.

There are other laws that attempt to penalize anti-competition activities. However, with very few exceptions, many of these laws have but skeletal provisions and do not provide meaningful guidance to the market on how our competition policy should be implemented.

Salient features

What is clear from the bills (at least after the Senate and House committee hearings) is that they do not prohibit monopolies per se, perhaps taking their cue from the Constitution and our Asean neighbors.

At the core of the bills are more detailed provisions on anti-competitive agreements (like price-fixing, market allocation), abuse of dominant position (like predatory pricing), anti-competitive mergers and more detailed enforcement mechanism.

Unlike its Senate counterpart, the House version proposes to create a five-man Philippine Competition Commission as a single venue for anti-competition issues. Similarly, the House version proposes to adopt non-adversarial methods of enforcement, like a request for binding ruling to make the law more business-friendly.

Anti-antitrust law

There are, of course, those who are against an antitrust law. Some economists argue that the need for an antitrust law stems from the wrongful notion that an unhindered and unregulated market leads to coercive monopolies. They assert that no unfair monopoly can ever be created by means of free trade in a free market economy.

Surely, there are policy issues yet to be decided in the plenary sessions of both Houses before an antitrust law becomes part of our statute books.

A basic policy issue, of course, is whether we really need a new antitrust law. If so, do we adopt the American system or the European model? What acts should be outlawed and what type of enforcement mechanism should be adopted considering the stage of our economic development? Should the law go for a separate competition commission or just create an office in the DoJ? How should the competition authority interface with other government agencies, like the Department of Energy, Department of Trade and the Securities and Exchange Commission on antitrust-related matters that, by law, are currently under their jurisdiction?

The big question is, whether a new antitrust law will finally see the light of day or will the bills suffer the same fate as the preceding measures?

Your guess is as good as mine.

(The author, formerly the president and CEO of the Philippine Stock Exchange, is now the co-managingpartner and head of the corporate and special projects department of Accralaw. He may be contacted at felim@accralaw.com.)"

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."

PART 2 - BusinessWorld - ANTI-TRUST PROTECTION FOR SMEs

2nd of 2 parts (View part 1 here and here).
Hit the stands on 26 May 2011
Available online on 25 May 2011


Click on image to enlarge

Part 2 - anti-trust in BusinessWorld

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

View Part 1 here and here

"Part II

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

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

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

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

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

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

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

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

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

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

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

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

BusinessWorld - ANTI-TRUST PROTECTION FOR SMEs

Hit the stands on 25 May 2011
Available online 24 May 2011

(Click on image to enlarge)

BusinessWorld: Atty. Lorna Kapunan on Anti-Trust

"Anti-trust protection for SMEs" (1st of 2 parts)
by Atty. Lorna Patajo-Kapunan
Published in BusinessWorld Online Edition on 24 May 2011
(Original article available here).

"Part I

The recent PLDT-Smart buy-out of Sun Cellular emphasized once again the need for a more comprehensive anti-trust law in the country. Public awareness of the lack of a determinative anti-trust policy has heightened. While the National Telecommunications Commission (NTC) has been tasked with investigating any anti-trust policies in the Sun Cellular sale, there continues to be much criticism for the lack of an anti-trust law with "teeth."

And while the NTC may be called forth to investigate possible anti-trust violations in the telecommunications sector, the question remains as to who will "police" similar violations in other industries, such as consumer goods, manufacturing, food, retail, and distribution.

The current business climate in the Philippines highlights the need not only for a comprehensive anti-trust policy but a regulatory body with teeth. Apart from NTC, there is the Department of Trade and Industry (DTI) tasked by law to implement and monitor compliance with trade and industry laws. But then, when an issue like predatory pricing or vertical price restraint comes up, DTI itself claims it has no jurisdiction. There is thus much confusion as to which and what agency has the expertise to regulate trade and industry laws. Who monitors and who metes out the punishment? Are the penalties even sufficient to prevent anti-trust violations in the Philippines?

Admittedly, "anti-trust" remains a somewhat vague concept in our country, especially to the general public. Lawyers and businessmen may understand the general idea, but would themselves be hard-pressed to define, much less abide with, perimeters surrounding anti-trust violations, precisely because of a lack of a comprehensive anti-trust law that provides such guidelines. What it all boils down to is the prevention of monopoly and the promotion of free competition. Why is this important to the common tao? The answer is because, when there are no clear-cut rules and regulations, foreign companies, multinationals, and large local companies, will continue doing anti-trust practices which ultimately affect not only the consumer but the Filipino worker, employee, and entrepreneur. And they will continue to do such prohibited acts precisely because they can get away with it here in our country.

While there are existing provisions on anti-trust in Philippine law, these provisions are scattered across different codes and republic acts. There are no implementing rules and regulations. The various and existing anti-trust provisions do not provide clear-cut guidelines, elements/requisites, and quantum of evidence required to determine whether an act constitutes unfair competition, monopolistic behavior, or restraint of trade. The penalties meted out alone by certain provisions are dismally insufficient as preventive measures.

These are the issues that the Philippine Senate hopes to address in various proposed anti-trust bills. During the Senate "Understanding Anti-Trust" public forums held last February 2011, facilitated by Senators Manny Villar, Juan Ponce Enrile, and Sergio R. Osmeña III, the following proposed anti-trust bills were presented to the public and extensively discussed: Senate Bill No. 1, authored by Senatore Juan Ponce Enrile; Senate Bill No. 125, authored by Senator Sergio R. Osmeña III, Senate Bill No. 175, authored by Senator Antonio F. Trillanes IV, and Senate Bill No. 1838, authored by Senator Miriam Defensor Santiago. While the Senate can be lauded for recognizing the need to strengthen our anti-trust laws, with the intention of providing greater protection to the consumers, Filipino small-to-medium enterprises (SMEs), and middlemen, these proposed bills have yet to be approved.

The absence of rules and regulations implementing anti-trust laws also translates to less anti-trust cases filed in and ruled on by the Philippine courts. In fact, in the Senate’s "Understanding Anti-Trust" Forum, it was reported that right now there is only just ONE anti-trust case filed before the Department of Justice. In the same Senate public forums, Senator Manny Villar called for the need for greater protection for the middlemen -- the Filipino SMES who provide retail, distribution, and other BPO services to multinationals and other foreign companies. There is an urgent need to provide for a level playing field and for penalties that will actually deter corporations from committing anti-trust and other prohibited acts.

(To be continued)"

MANIFESTO on Anti-trust

MANIFESTO ON THE NECESSITY OF AN ANTI-TRUST LAW IN THE PHILIPPINES:
(Published advertisement in the Philippine Daily Inquirer on 23 May 2011)

(Click on image to enlarge)

Image source, and more details in http://antitrustlawcenter.blogspot.com/

The need for a comprehensive anti-trust law - in the spotlight again

"A tale of two telecom industries"
by Cielito F. Habito
Published 24 May 2011 in the Philippine Daily Inquirer
(Original article also available online here).

"THERE ARE remarkably parallel developments transpiring on both sides of the Pacific in two very different economies: the Philippines and the United States of America. Here’s the general scene: A giant telecommunications company has moved to acquire (and thus merge with) another competitor, threatening to achieve a commanding share of the industry, thereby reducing competition therein.

In the US, American Telephone & Telegraph (AT&T) has announced a $39-billion takeover of T-Mobile USA, in a merger that would make the company the dominant player in an industry that has heretofore had four major players. Industry rival Sprint Nextel Corp. is fighting the move, claiming that the merger threatens its very existence as a standalone company, which could bring back the old telephone monopoly (of the then giant AT&T) that US regulators broke up in 1984. Since the AT&T-led American Bell Telephone Co. opened the first telephone exchange in 1877 in New Haven, Connecticut, this single firm had controlled the American telephone industry. The forced break-up led to a lively competition that resulted in lower costs and wider choices for American consumers.

In a parallel development here at home, the Philippine Long Distance Co. (PLDT) has acquired a controlling stake in Digitel Corp. which operates Sun Cellular, whose entry into the erstwhile duopoly of PLDT/Smart and Globe had dramatically transformed the nature of pricing in the industry, to the benefit of consumers. Just as Sprint Nextel is unhappy in the US, so is Globe in the Philippines as it faces the prospect of being relegated to a small minority share (30 percent) of a two-player market. It is arguing for a more level playing field with the National Telecommunications Commission, inasmuch as PLDT would now own a disproportionate share of the telecommunications frequencies on which the companies may transmit their phone services.

Both mergers have yet to be cleared by their respective governments, even as their merits and demerits have been the subject of active public policy debate. But there’s a key difference between the two stories: the legal and institutional framework within which government clearance for the mergers is being deliberated is quite different in the US from the Philippines. In the US, there has long been a strong law against cartels and monopolies, through the Sherman Antitrust Act of 1890, later reinforced by the Clayton Antitrust Act of 1914. The purpose of the law is to prevent the combination of business entities that could potentially harm competition, such as monopolies or cartels. At the time of its passage, “trust” was synonymous with monopolistic practice (which is no longer necessarily the case today). This was because the trust—a centuries-old form of contract whereby one party entrusts its property to a second party— was a popular way for monopolists to hold their businesses, and a way for cartel participants to create enforceable agreements. Internationally, the more common name now for such laws is “competition law” or “competition policy.”

US antitrust laws declare it a felony for any person to monopolize or attempt to monopolize any part of trade or commerce, or to combine or conspire with any other person or persons to restrain trade or commerce, whether in domestic or foreign markets. Other practices deemed illegal include price discrimination between different buyers if such discrimination tends to create a monopoly; exclusive dealing agreements; tying arrangements; and mergers and acquisitions that substantially reduce market competition. The AT&T and T-Mobile merger could fall under the last, giving the US government explicit basis to stop it if it can be established that this will indeed reduce market competition.

The US Senate is currently deliberating on the issue, and some lawmakers have indicated public skepticism over AT&T’s claim that T-Mobile was “not an important competitor,” in an apparent attempt to play down the significance of its move. The US legislators have noted, for example, that T-Mobile often undercuts the prices of AT&T and current industry leader Verizon Wireless—something anyone of us roaming with our cell phones in the US can readily confirm (check your bill: a text message sent home from the US via T-Mobile costs P20, but one sent through AT&T costs P25).

In a similar manner, Sun Cellular had constantly been undercutting the prices of PLDT-Smart and Globe, forcing the latter two into offering the “unlimited” packages that it first introduced.

Whether in the US or here, it seems that the strategic response of the more dominant player was to buy out the underpricing competitor. And just as bystander Verizon in the US must privately welcome the elimination of a “price-spoiler,” Globe must also find some private satisfaction in the elimination of a player that had spoiled the profitable party (i.e., before Sun entered the picture years ago).

Still, the Philippines does not have the comprehensive competition policy that the US has long had, to give it a strong legal basis to stop the PLDT-Digitel merger. What it has are piecemeal laws and executive issuances that had opened previously monopolized or protected markets, especially those introduced by President Fidel V. Ramos in the 1990s to break open prominent monopolies and cartels, notably in telecoms and domestic airlines. But many remain, such as in cement, domestic shipping, port handling services, and other key industries. It is high time Congress acted to correct the glaring deficiency.

* * *

E-mail: cielito.habito@gmail.com"

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."

Anti-trust in Business Agenda DZAR

Atty. Lorna Kapunan was the guest speaker in the "Business Agenda" DZAR, Sonshine Radio, yesterday 11 April 2011, where she spoke at length about anti-trust initiatives by the Senate and other issues surrounding anti-trust violations in the country today.

Atty. Kapunan discussed the lack of a comprehensive anti-trust policy in the country, and how proposed Senate bills by Senators Sergio Osmena III, Manny Villar, and Juan Ponce Enrile hope to address this issue. The lawyer cited examples of how anti-trust violations are being committed by companies, particularly multinationals to the detriment of Filipino consumers and small-to-business enterprises.

Atty. Kapunan emphasized the need for greater legislative will to enforce the proposed anti-trust policy and is calling out for greater protection of the Filipino businessman.

"Business Agenda" is hosted by Tony Cuevas and airs daily at 9:00 am.

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.