Just recently, our President signed the Philippine Competition law (PCL), or Republic Act 10667. It is considered a landmark legislation for a country that waited more than 20 years for its passage. This new legislation sends a clear and loud message to the international investment community that, indeed, the Philippines is more than ready to level the business playing field and is open for businesses who are eager to compete fairly and ethically.
The PCL applies not only to illegal acts committed locally but also to those done outside of our borders that have direct, substantial and reasonably foreseeable effects in the country.
Watchdog
The PCL creates the Philippine Competition Commission, which will have regulatory responsibility over investigations and inquiries on abuse of dominant position, anticompetitive mergers and acquisitions and agreements. Violators of the law are liable for administrative penalties of a maximum fine of P100 million on the first offense and P250 million for the second offense for abuses of dominant position and anticompetitive agreements or transactions. A prison term of two to seven years is also included. In order for the law to immediately produce its desired effect, the decisions of the Commission are immediately executory, unless otherwise restrained by the Court of Appeals or the Supreme Court.
Notably, the law does not prohibit dominance in the market or monopolies per se. What it prohibits are agreements between competitors and abuse of dominant position. The law presumes entities with at least 50-percent market share as dominant players.
Clear rules for healthy competition
Under the PCL, anticompetitive agreements include price fixing, dividing or sharing geographical markets in terms of sales volume, kinds of goods and services, limiting or controlling production, markets or investment and bid rigging. Meanwhile, abuse of dominant position encompasses imposition of barriers to entry of new players or preventing current players from increasing their market share, making supply of goods dependent on the purchase of other goods and services, selling services or goods below market prices in order to stop competition and restricting sales or trading of goods in an anticompetitive manner.
The law is business-friendly because it does not prevent dominant players from increasing their share in the market because of top quality services or products, excellent research and development or superb marketing capabilities.
Neither does it prohibit exclusive distributorship agreements or other arrangements which are commonly used in this jurisdiction. Like other antitrust laws, the PCL seeks to develop and protect the free and efficient play of market forces while checking on some of its abuses or excesses, operating under the fundamental economic principle that robust competition benefits society.
The intention is not to punish businesses just because they are big or because they are generating profits. It recognizes the basic postulate that healthy competition in every market is good as it keeps those engaged in commerce to be constantly on their toes, continuously innovating, improving their processes, methods and offering more favorable terms and conditions to its customers so that the latter will stay with them and not transfer to competitors. Thus, those companies that are poorly run or are driven by unfair and unethical business objectives normally fold up, while the honest and better run organizations flourish and grow. The market serves as the final arbiter on who stays and who goes.
Best for the consumers
Proper enforcement of competition rules results to lower prices, better quality products and services and more choices for consumers. Indeed, there is nothing better than market economics working efficiently, fairly and properly. At the end of the day, Juan de la Cruz benefits and the economy gets its much-needed boost.
Adam Smith sums it all up by saying that the baker does not ask himself whether you might wish to enjoy some of his excellent bread this evening with your meal. No, he wants you to give him money, and thus, he strives to make excellent bread so that you will be persuaded to purchase your bread from him and not from some other baker.
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