Is the Philippine Competition Act really a game-changer?

The Philippines has been a rising star in the global economy in the past 5 years and that has brought it unprecedented attention on the world’s stage. Despite this, the economy still lags behind in highly conspicuous ways.

The Philippines is the only one of the 5 original ASEAN members to not have formally instituted a comprehensive competition policy despite a two-decade attempt to do so. (Read: Part 1: What consumers need to know about the Philippine Competition Act)

Having recognized the need and mustered the political will to get one passed, the remaining concern is to keep the bill free from influences that could compromise its strength. (Read: Part 2: Keep the devil away from the Philippine Competition Act)

Senator Paolo Benigno "Bam" Aquino IV views the Philippine Competition Act as essential if the country is to take the next step in its development from two aspects.

To a certain extent, acts that are considered the norm here are considered illegal in most countries because of the lack of such a law, he explained.

“With this competition act, we’re saying that these acts are unfair to other players, especially small ones. [We] have to stop it if we want to continue growing as an economy. If we want our growth to be felt by more people in the country, then we have to follow these rules,” Aquino said at a roundtable in June discussing the Philippine Competition Act.

The competition act is more relevant than ever as our economy is on track for access to much larger global markets, Aquino said.

The country is part of the ASEAN Economic Community (AEC), and it also gears to possibly join big-ticket trade agreements such as the Trans-Pacific Partnership (TPP) and negotiate further individual trade agreements.

A highly competitive market is one of the things foreign governments look for when negotiating them, Aquino said.

“Can you imagine entering these larger markets without a competition policy?  We’d just be opening up ourselves to abuse,” he added. 

CLARIFYING. Senator Bam Aquino goes over the Philippine Competition Act's points in details at a roundtable discussion. Photo by Chris Schnabel / Rappler

CLARIFYING. Senator Bam Aquino goes over the Philippine Competition Act's points in details at a roundtable discussion.

Photo by Chris Schnabel / Rappler

Not anti-business

The soon-to-be law is not anti-business, Aquino clarified. In fact, the initial draft of the Senate version of the bill was written by the Philippine Chamber of Commerce and Industry (PCCI), a body that is mostly made up of small businesses but includes large ones as well, he shared.

Aquino explained that while drafting the law, his team received numerous position papers from firms across the business landscape but said that “90% of them resulted in improvements to the Act.”

“The main concern of the business sector was that in the event that the Philippine Competition Commission (PCC) was corrupt, then the law would be used to as a tool to harass business,” he said.

The creation of the PCC is the main feature of the Act. It creates a 5-person body that will be chiefly responsible for identifying and deciding on penalties for predatory behavior. 

Because of this, most of the business sector’s proposals centered on lawfully-accepted cases, which could further clarify the law and the law’s language reflects these suggestions. 

“We included provisions like ‘conduct that improves production and distribution’ or that ‘leads to technical and economic advancements,’ while providing a fair share of benefits to the consumer shall be permissible, in part to protect business from abuse,” Aquino shared.

“We don’t want to penalize size,” Aquino said. Instead, he said they want firms to grow and create value, but through price and quality and not because the firm eliminated all others through unfair means.

Foreign investor-friendly

The foreign business community, who have long complained against the local economy being unfairly tilted against them, have reacted positively to the impending passing of the Philippine Competition Act.

“The lawmakers delivered a great success. We’re positive that the law will create a fairer competition environment over time,” Henry Schumacher, Vice President for External Affairs of the European Chamber of Commerce of the Philippines, said in a text message.

John Forbes, a senior adviser to the American Chamber of Commerce of the Philippines, said the chamber “was pleased that the Philippines will soon a have comprehensive competition law. The new law is consistent with the laws of over 100 countries." 

Japanese Chamber of Commerce and Industry of the Philippines Executive Director Nabuo Fujii said, “a competition law is a minimum requirement for investment into domestic industry. It’s one step forward.” (READ: 200 Japanese firms in China want to move to PH)

He added, however, that the rule limiting foreign ownership in an enterprise to only 40% is still “a wall for us.”

KEEN OBSERVER. Iain Mansfield, the director of UK Trade and Investment helped draft the latest version of the UK's competition policy and is watching developments of the local policy closely . Photo by Chris Schnabel / Rappler

KEEN OBSERVER. Iain Mansfield, the director of UK Trade and Investment helped draft the latest version of the UK's competition policy and is watching developments of the local policy closely .

Photo by Chris Schnabel / Rappler

Enlarging the pie

The reason why foreign investors welcome the bill is not necessarily because they think it will help their companies to compete, “because you still have things like the 60-40 rule and other potential barriers to investment,” shared Ian Mansfield, Director of United Kingdom Trade and Investment (UKTI). Mansfield worked extensively on the most recent version of the United Kingdom competition bill in 2014 and thus took an interest in the Philippine Competition Act.

The main attraction of it is in its potential to grow the economy and therefore investment opportunities, he explained.

“What we think the competition bill will do is it will make the Philippine market, as a whole, more competitive and that would stimulate growth. That would greatly benefit our companies who want to take part in projects here, want to sell things, and increase our exports to this market,” Mansfield detailed.

Transformational?

The lawmakers behind the Philippine Competition Act have lofty ambitions, describing it as “pro-poor, pro-people, and pro-business” and hailing its potential to fundamentally transform the economy.

The question of whether the new competition policy can successfully alter deeply ingrained local business practices and create a free competition environment will likely take years to answer categorically.

Until it is proven to be a law with teeth, some unscrupulous traders could still collude and drive prices of items such as garlic to sky-high, all at the expense of Filipino consumers. – Rappler.com

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