Towards fair competition, healthier economy

Senator Bam Aquino
Towards fair competition, healthier economy
A culture of healthy competition is a fundamental building block in our transition to a sustainable and inclusive middle-income country – a dream for many of us Filipinos that now has a chance of becoming a reality

In a competitive market, businesses gain success by creating quality products, managing expenses, achieving operational efficiency, and effectively communicating and catering to their market.

Nations around the world recognize the need to create a business environment that best reflects this through competition policies that guard against bad business behavior.

Back in 1890, the US enacted the US Sherman Act, the first set of national laws to deal with monopolies and restraints of trade. 

Australia followed suit in 1906 with the Australian Industries Preservation Act. After World War II, Japan passed its Monopolies and Restrictive Practices (Inquiry and Control) Act.

More recently, our neighbors in Southeast Asia have also passed their respective competition laws: Indonesia and Thailand in 1999, Singapore in 2004, Vietnam in 2005, and Malaysia in 2012.

Finally, after two decades worth of attempts, the Philippines is on its way to enacting its first comprehensive competition law – a legislation aimed at protecting local businesses and building a vibrant, more competitive economy by putting an end to anti-competitive agreements, cartels, collusions, unfair & abusive practices.

At its core, the competition law is about maintaining opportunities for all to compete so that present market leaders cannot exclude up and coming challengers who might be able to lower prices, improve product quality, offer consumers more choices, or spark the next wave of innovation in the market.

The Fair Competition Act of 2014 has successfully passed through the Senate, and the House of Representatives just recently approved the bill on its third reading – a big win for the Philippine economy, for local businesses, and for every Filipino consumer.

Reaping benefits

The benefits of healthy competition in industry, in developing countries in particular, have long been acknowledged. The Organisation for Economic Co-operation and Development (OECD) Global Forum on International Investment (2008) hailed the positive impact of promoting market competition in a number of developing economies, and among them is attracting foreign investments.

The OECD paper, “Competition Policy Enforcement: Experiences from Developing Countries and Implications for Investment,” stated that an effective competition policy will eliminate barriers to entry and exit of new business entities, curb anti-competitive practices, and lead to increased competition and, inevitably, greater investment into the country.

In our recent history, there are actual, observable examples of how increased competition has improved industry, spurred innovation, and resulted in better and cheaper choices for consumers.

In fact, we reap the benefits of healthy competition every time we flip through TV channels, struggle to decide which new restaurant to try, or marvel at the new upgrades on our latest smartphone.

Try and recall the first mobile phones introduced to the market in the early 1990s. Who would have guessed that in just two decades, those bulky analogs would transform into light, touch-screen devices of the future?

In just a few years, cellphones of all shapes and sizes were introduced, each one trying to one-up the other. The antenna became obsolete, screens got bigger and more colorful, batteries got lighter and more compact, and a variety of new features were introduced until the cellphone morphed into an all-in-one life-hacking device with an HD camera, editing tools, a music library, Internet access, Candy Crush, world maps, GPS tracking, Twitter, and a wealth of other helpful applications.

In the Philippines, with more and more companies selling mobile phones, there are a variety of brands and models to choose from. With this power to choose comes the power to demand quality phones at the lowest prices.

In 1997, a Nokia 5110 cost over P10,000. Today, that amount can buy you a Nokia Lumia with features that move well beyond calling, texting, and playing snake. Plus, you can purchase a similar, local brand mobile phone from Cherry Mobile or MyPhone for just a fraction of that price.

While the mobile phone used to be a status symbol for the elite, today you see anyone from students to sari-sari store owners and taxi drivers swiping through their own touch-screen phones.

Competition between mobile phone manufacturers spurred innovation in targeted markets, diversifying products while driving down prices for the benefit of both the industry and the consumers.

We’ve seen the same pattern in the airline industry. In the 1980s, the flights zipping through our archipelago were few, far between, and expensive. Flying to Davao to visit my mother’s family was a calculated, budgeted expense.

But with more airline companies came more flights and more choices for us Filipinos. Companies began getting to know the market better and started targeting specific groups – like budget travelers. Opportunity was found in lower prices and today, the country is in a flurry with ever promo fare announcement.

Power of competition

Now, more Filipinos get to explore the Philippines and the world for cheap. More entrepreneurs can fly across seas quickly and at any time of day to scout for partners and make sound business deals. The local tourism sector also benefitted greatly from the intense competition in the airline industry.

Such is the power of healthy competition in these specific industries, which we hope can be replicated in even more industries in the country. The Fair Competition Act can spearhead this healthy, competitive environment for our local business sector.

The legislation’s priority is to create a fair environment for all businesses – new or old, small or large. It penalizes business behavior that is anti-competition and that hinders our markets from providing the best options and opportunities for our consumers.

Businesses can no longer make moves to create barriers to entry for new players nor can they bully smaller enterprises by selling below cost or restricting market opportunities.

Colluding with other dominant players to fix prices, divide territories, or refuse deals with particular vendors will also be penalized and, in fact, criminalized.

But while this law is vigilant against exercise of market power, it is not against bigness. It respects dominance gained by competing on merits.

The Act seeks to establish a Fair Competition Commission (FCC) to look into the cases filed and objectively determine whether there have been abuses. The FCC is tasked to promote competition, enhance economic efficiency, and prohibit anti-competitive acts and abuse of power.

It will be supported by the existing Office for Competition (OFC) of the Department of Justice (DOJ).  It will serve as the prosecutor in criminal cases filed and have exclusive authority over the criminal enforcement of this Act.

The FCC, OFC and other government agencies will work hand in hand to build a better business environment that the consumers desire and deserve.

For too long, the lack of a competition policy has crippled new businesses and left micro, small and medium enterprises (MSMEs) vulnerable to abuse. At the end of the day, it is our consumers that are robbed of better quality, more choices, and lower prices for products and services.

The Fair Competition Act is pro-poor, pro-people, and pro-business. It safeguards the welfare of businesses, large and small, and protects honest, hard-working entrepreneurs against abuse of dominance and other unfair practices that put them and their consumers at risk.

With four years of sustained economic growth, it is now time to work on strengthening our local industries, promoting a culture of competition and innovation, and boosting our potential to serve the global market with outstanding products and services.

While we acknowledge that the Fair Competition Act is not the miracle cure that will sustain our thriving economy, we believe that this is the necessary step, the significant leap towards a culture of healthy competition that promotes efficiency, and inspires ingenuity, creativity, and innovation in the Philippines.

More importantly, this culture of healthy competition is a fundamental building block in our transition to a sustainable and inclusive middle-income country – a dream for many of us Filipinos that now has a chance of becoming a reality. – Rappler.com

 

The author is the Chair of the Senate Committee on Trade, Commerce and Entrepreneurship.  He is the author of the Fair Competition Act of 2014 and the recently enacted Go Negosyo Act. E-mail your comments and suggestions to team.bamaquino@senado.ph

 

 

Add a comment

Sort by

There are no comments yet. Add your comment to start the conversation.