Economists and legal experts said lawmakers should not give in to lobbying from some sectors that aim to water down the proposed Fair Competition Act—which is now inching closer to approval in Congress—through various exemption provisions.
At the Ayala University of the Philippines School of Economics (UPSE) Economic Forum on Monday afternoon, experts said the better option is to give the planned Fair Competition Commission more flexibility in going after firms that are demonstrating anticompetitive behavior or practices.
“The exemptions in the bills may be negating the aim of promoting fair competition. The versions should clean up exemptions and leave the decision-making [as to who are exempted] to the [Philippine Fair Competition] Commission,” said lawyer Anthony Abad, CEO of TA Trade Advisory Group, at the forum.
Abad said that, for years, the different versions of the Fair Competition bill filed in Congress have been peppered with exemptions as to what constitutes anticompetitive behavior, giving abusive firms loopholes to work on. To avoid this, he said, lawmakers should limit exemption clauses or put flexibility in the wording of the bill.
“The commission should be the one to decide if an agreement or conduct is anticompetitive or not, but, early on, they are already inserting [in the bill] what constitutes [anticompetitiveness] and what doesn’t. The effect of this is that lawyers of these companies can reason that the company’s contribution to economic progress or efficiency outweighs the anticompetitive behavior,” Abad explained.
“In the legislation of the European Union, they exempt some activities if they contribute to technological development, for example. But their use ‘may not be considered as anticompetitive behavior,’ so it can still be open for discussion,” Abad added.
Using less definitive language in the exemption provisions of the bill will also allow for further investigation by the Commission to determine if anticompetitive behavior is at work, instead of being let off the hook immediately.
Examples of these exemptions are found in Sections 5 and 6 of the House of Representatives’s Philippines Fair Competition Act, or House Bill 5286, which deals with exemptions on anticompetitive agreements and abuses of dominant position, respectively.
In both provisions, if the agreement, or the conduct, is seen as contributing to improving production or boosting market efficiency, they are not considered to be either an abuse of a dominant position or considered an anti-competitive agreement.
The Senate version, which has already been passed by the upper chamber of Congress last December, allows for more leeway to investigate anti-competitive practices, as the exemption provisions are upon the determination of the commission.
Economist Dr. Ma. Joy V. Abrenica of the UPSE also stressed that the Fair Competition bill must not be too quick in ruling the illegality of actions taken by companies that enjoy market dominance.
“The law will be better off using a rule of reason [ROR] approach, as this is more adaptable to the business sector and will give more flexibility to small and medium enterprises,” Abrenica said during her presentation in the forum.
The ROR approach analyzes the market outcome and gauges the positive and negative effects of a company’s action before determining it as a prohibited, anticompetitive conduct. This is the opposite of the “per se prohibition,” which is enshrined in the bill’s House version, which automatically considers certain activities—having the appearance of being anticompetitive—as illegal.
“There should always be proper economic analysis. No dominant position should ever be ruled as ‘per se prohibited,’ unless it has been proven that there has been abuse of that dominant position; this is the way of ROR,” Abad echoed.
The recommendations are expected to be incorporated come the bicameral conference committee, when both houses of Congress will meet to consolidate the differing provisions of their respective versions.
Senate Committee for Trade, Commerce and Entrepreneurship Chairman Bam Aquino expects the House of Representatives to be finished with its version, after the congressional break in June, and for the legislation to be up for approval before the Chief Executive’s State of the Nation Address in July.