THE Philippine Competition Act, or Republic Act 10667, was passed and signed into law in July 2015. Newly designated Philippine Competition Commission (PCC) Chairman Arsenio M. Balisacan is now working on the implementing rules and regulations.
There are several purposes of the act. It is to “enhance economic efficiency and promote free and fair competition” and to “prevent economic concentration which will control the production, distribution, trade, or industry that will unduly stifle competition, lessen, manipulate or constrict the discipline of free markets.” Further, this legislation is supposed to “ensure an efficient market competition in providing a level playing field among businesses engaged in trade, industry and all commercial economic activities.”
There is no question that in almost all situations, free competition among a number of players in an industry benefits the consumer through increased innovation and through pricing. But how can the consumer be assured that the government can make the right choices?
It is good to know that there are multiple suppliers of instant coffee and sardines, for example. But interestingly, the price competition for these two products seems to be based on the advertising expenditures of different companies, and not the product inside the can or sachet itself. Brands with greater promotion tend to be higher priced, as witnessed by supermarket “generic” items—without any advertising costs—being sold cheaper.
On one hand, where multiple distribution systems, such as for water lines, would not make any economic sense, the government regulates the pricing. It might not be desirable for a single cell-phone provider, yet in some countries like Germany, a single provider does supply 90 percent of the cell-phone service. Japan, on the other hand, has many providers, without one player dominating the market with a majority share.
The worry, though, is how far will the PCC be allowed to go?
Some condominium buildings and gated villages have exclusivity contracts with one Internet service provider to avoid the inconvenience of multiple infrastructures like cables and wires. In return, subscribers in these buildings and villages receive a discounted rate. Several shopping malls have the same system. Will the PCC force these contracts to be voided in the interest of more competition?
While there are literally hundreds of television cable companies in the Philippines, Metro Manila is dominated by one carrier. Many regional areas and towns are also dominated by one cable company. Do these situations fall under anticompetitive practices or simple free-market efficiency and economy of scale?
The principles behind the Philippine Competition Act are sound, but when the government reaches too far into the marketplace, opportunities for both abuse and corruption increase.
Image credits: Benjo Laygo