At least 14 senators have signed a committee report that consolidated four separate antitrust bills seeking stiffer sanctions against unfair trade and anti-competitive practices, as well as the creation of a new regulatory body to check trade competition and monopolies.
The endorsement of the merged antitrust measures by the Committee on Trade, chaired by Sen. Manuel Villar, paves the way for plenary consideration and approval of what is being drawn up to be a tougher antitrust law when Congress reconvenes regular sessions following the Christmas recess.
Villar earlier told the BusinessMirror at the sidelines of a Christmas party at the Senate that the committee report was already being circulated for signatures among members of the committee.
After a series of public hearings, Villar’s committee combined Senate Bill 1 (Competition Act of 2010), filed by Senate President Juan Ponce Enrile and Sen. Ralph Recto, with Senate Bill 123 (Fair Trade Act of 2010) filed by Sen. Serge Osmeña, Senate Bill 358 filed by Sen. Antonio Trillanes, also entitled Competition Act of 2010, and Senate Bill 1838 (Monopolies and Combinations in Restraint of Trade) filed by Sen. Miriam Santiago.
In his version of the antitrust bill, Enrile noted that Filipinos have been “victims to big business.” It is the Senate’s duty to “provide protection to our people against price manipulators,” he said.
“In a volatile economic situation such as that which we are experiencing now, it is not very difficult to imagine how artificial prices in one or two commodities are able to directly or indirectly raise the prices of related goods and services,” he said.
He cited the Constitution’s Article 12, Section 19, which mandates that “the State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.”
He also said Section 22 of the same article encourages the promulgation of legislation that would impose civil and criminal sanctions against those who circumvent or negate this principle.
“Although previous legislations have been passed pursuant to this constitutional mandate, the increased deviousness and complexity of schemes in perpetuating monopolies in the free-market landscape necessitate an equally sophisticated legislation that would effectively address this concern,” Enrile said.
Osmeña’s bill, on the other hand, provides for the creation of a Fair Trade Commission and defines absolute and relative monopolies and trusts which, Osmeña observed, are “in themselves constitute prima facie violations of the law, in order to facilitate its enforcement.”
According to Osmeña, the bill’s main enabling mechanisms are: recourse given to complaints initiated by private citizens who are aggrieved by abuses committed by companies exercising market power; and, the authority vested in the Fair Trade Commission to initiate investigations, impose penalties for violations of the law and to establish antitrust mechanisms.
“This bill will provide the unifying framework that will promote subsequent liberalization measures and ensure that domestic markets are accessible to all would-be entrants and participants and free from the stifling control of any single powerful monopoly,” he said.
Telco deal
AN earlier committee report submitted separately by Senate Public Services Committee Chairman Sen. Ramon Revilla Jr., also endorsed the early enactment of an antitrust law after conducting an inquiry into the share-swap deal between Philippine Long Distance Telephone Co. (PLDT) and Digital Telecommunications Philippines Inc. (Digitel).
“Congress must immediately enact an antitrust legislation that is sufficiently comprehensive to enhance and strengthen the competitive framework in the telecommunications industry, in view of protecting and advancing public interest,” Revilla recommended in his PLDT-Digitel share-swap inquiry committee report.
Revilla’s committee concluded in its report that while neither PLDT nor Digitel had violated their respective congressional franchises in forging the merger, complaints about the emerging entity being a virtual monopoly in telecoms should be addressed by the regulators even as Congress should focus on crafting a clear antitrust legislation.
Enrile’s bill penalizes combinations or conspiracies in restraint of trade and all forms of artificial machinations that will injure, destroy or prevent free-market competition.
If the Enrile version is adopted in the upcoming plenary deliberations, the updated antitrust legislation would cover cartels, monopolies, abuse of monopoly power or dominant position, including predatory behavior toward competitors, price-fixing and bid-rigging, limitation and control of markets, market allocation, arrangements to share markers or sources of supply, price discrimination, exclusivity and tie-in arrangements, among other things.
Enrile bill
The Enrile bill defined cartel as “a combination of firms, providing goods in relevant markets, acting or joined together to obtain a shared monopoly to control production, sale and price, or to obtain control in any particular industry or commodity, or a group of firms that agree to restrict trade to their mutual benefit, which may or may not be of an international scale. It shall also refer to firms or section of firms having common interest designed to promote the exchange of knowledge resulting from scientific and technical research, exchange of patent rights and standardization of products among themselves with the intent of preventing, restricting or distorting competition.”
Once enacted into law, “it shall be unlawful for firms providing goods in relevant markets to join together to monopolize, or to control production in a particular industry or commodity, the sale and price of such good, and to agree to restrict trade for their mutual benefit, which may or may not be on an international scale. This shall also include an association by agreement of firms or sections of firms having common interests designed to promote the interchange of knowledge resulting from scientific and technical researches, exchange of patent rights and standardization of products among themselves with the intent of preventing, restricting or distorting competition.”
It added that “restrictive agreements resulting from cartel-like behavior of firms, in any form, are hereby per se deemed illegal, including but not limited to agreements to fix the selling price of goods or other terms of sale; agreements to limit supply or output; agreements to divide the market, whether by volume of sales or purchase or by territory, by type of goods sold, by customers or sellers, or by any other means; agreements to exclude or limit dealings with particular suppliers or sellers from supplying or selling goods, or customers from acquiring or buying goods; agreements applying dissimilar conditions to equivalent transactions with other parties, thereby placing them at a competitive disadvantage; and agreements making the transactions in particular goods dependent upon other conditions which have no connection with the subject of the transaction.”
The Enrile bill further provides that “there shall be a prima facie case for the existence of a cartel if and when the Department of Trade and Industry or concerned regulatory agency finds that two or more persons or firms that are ostensibly competing for the same relevant market and actually perform uniform or complementary acts among themselves which tend to bring about artificial and unreasonable increase, decrease or fixing in the price of any goods or when they simultaneously and unreasonably increase, decrease or fix the prices of their seemingly competing goods thereby lessening competition in the relevant market among themselves.”
Violators could be penalized with a fine of not less than P10 million but not more than P50 million if a natural person; or a fine of not less than P250 million but not exceeding P750 million if a firm, and by imprisonment not exceeding 10 years, or both, at the discretion of the court.
In the alternative, a fine shall be imposed in the amount double the gross proceeds gained by the violator or double the gross loss suffered by the plaintiffs, the Enrile bill added.
Regulatory agencies shall, in the conduct of their functions or duties, also have the power to impose fines in the amount not less than P100,000 and not exceeding P5 million if a natural person; and not less than P5 million and not exceeding P50 million if a firm for each violation of or noncompliance with an order or notice of the regulatory agency. It was also provided that 10 percent of such fines shall accrue to the budget of the regulatory agency for the exclusive use in the enforcement of the antitrust law.
Clear definition
According to Villar, the proposed law aims to clearly define the prohibited acts, including “anticompetitive conduct, abuse of dominance and anti-competitive mergers.”
He explained that anticompetitive conducts are committed by companies that unreasonably prevent, restrict or substantially lessen competition. “This would include price fixing, limiting production, and other acts tending to achieve the same result which is to annihilate competition,” he said.
Villar added that abuse of dominance happens when a firm misuses their market position by engaging in unfair competition with the purpose of preventing, restricting or lessening competition.
“What constitutes this would be the selling of goods or services below cost, unless for clearance, inventory, sale or any other valid purpose; imposing barriers to entry; or setting prices or other terms or conditions that differ or discriminate between the customers and sellers,” he said.
Villar said probably the most controversial provision in the measure is the anticompetitive mergers. He said firms engaged in commerce, trade or industry should not acquire, directly or indirectly, the whole or any part of the stock or other share capital, assets or voting rights of one or more firms engaged in any commerce, trade or industry where the object or effect of such conduct is to prevent, restrict or substantially lessen competition.
HE added that the committee is also endorsing the creation of the Office for Competition under the Department of Justice.
He clarified that the powers of the proposed Office for Competition shall be cumulative to the power and authority of the different government agencies concerned over an industry, “and shall not in any way derogate the power and authority of such agencies.”
Villar said safeguards were also installed to prevent the Office for Competition from abusing its discretion in determining the existence of prohibited acts.
This way, firms and business owners can find comfort in the fact that this bill is in no way adverse to nor is it enacted to prosecute them.
“An overview of such standards by which a firm or merger may be found to be in exercise of anticompetitive behavior would be by close examination of its structure, the supply and demand situation, the impact of conduct on market conditions, and state of the industry as well as its cost and profit levels. As a whole, it is the attainment of the objectives of this bill which are given importance in the general interest of the country,” he said.
