Last but not the least

At long last, the Philippines has a national competition policy. The President signed the Philippine Competition Act [Republic Act (RA) No. 10667] into law last July 21, 2015. The law prohibits anti-competitive agreements, abuse of one’s dominant market position, and anti-competitive mergers and acquisitions. To implement the said policy, the law establishes the Philippine Competition Commission (PCC) as an independent quasi-judicial body attached to the Office of the President.

Under RA No. 10667, anti-competitive agreements, such as those which restrict competition as to their terms of trade and price, price fixing along with other bid manipulation practices are per se prohibited by the law. Similarly prohibited are agreements between or among competitors that substantially prevent or restrict competition by limiting and controlling production or investment, and dividing or sharing the market by any means. 

The law further proscribes entities from abusing their dominant position in their respective markets by means that would prevent or restrict competition. Conduct that may be considered as abuse of dominant position include, among others, the sale of goods and services below cost to drive out competitors, hindering the growth of competitors in a specific market, imposing unfair prices, and limiting production or technical development to the prejudice of consumers.

In the disposition of cases involving these prohibited acts, the law enumerates the duties of the PCC and lists down the factors to be considered in determining an anti-competitive agreement.

RA No. 10667 does not prohibit all transactions that restrict competition such as when the transaction contribute to the production and distribution of good and services, or promotes technical and economic progress, and in the end benefits the consumer.

With certain exemptions, RA 10667 likewise prohibits anti-competitive merger or acquisition agreements that prevent or lessen competition in a relevant market. A significant provision in the law gives the PCC the authority to review mergers and acquisitions based on factors the PCC deems relevant. Moreover, compulsory notifications to the PCC are required from the parties to the merger/acquisition where the value of the agreement exceeds P1 billion. Failure to notify the PCC would render as void the consummated merger/acquisition and subject the parties thereto to an administrative fine ranging from one to five percent of the transaction.

Considering the novelty of this national competition policy, the law is not entirely in practice as of yet since the rules and regulations necessary to implement RA No. 10667 has not been issued. Nevertheless, entities affected by this new policy have two years from its enactment to renegotiate their agreements or restructure their businesses in compliance with RA 10667.

As a member state of the Association of Southeast Asian Nations (Asean), the enactment of RA 10667 was just in time, if not a little late, to achieve the country’s commitment to a regional economic integration through the Asean Economic Community (AEC) by the end of 2015.

The Philippines was the last of the five founding states of the Asean to have a fair competition policy, but it cannot be said to be the least in this facet. Although up until now, it had no integrated and comprehensive fair competition policy, the Philippines actually has existing fair competition laws spread out in the different regulations and specific industry policies.

The Philippine Constitution mandates the regulation and prohibition of monopolies disallowing combinations in restraint of trade and unfair competition. Pursuant to this constitutional goal, the Cheaper Medicines Act and the Downstream Oil Industry Regulation Act prohibits the manipulation of prices that restrict competition. Meanwhile, unfair practices and anti-competitive acts are prohibited under the Consumer Act and the Electric Power Industry Reform Act (EPIRA).

Along with other recently passed laws and economic reform policies, the passing into law of a national competition policy is one of the distinct endeavors of Asean member states in order to implement the AEC.  The presence of a national competition policy would provide a “level-playing field” for businesses thereby encouraging competition in the market. A competitive market provides us consumers with more options and alternatives in our choice of goods and services. This not only protects the business processes, but more so the consumers. In this aspect, a national competition policy benefits consumers the most.

However, consumer welfare alone does not lead to economic efficiency.  For the economy to grow and develop, consideration must also be given to market players, especially domestic players. The issue lies on whether our local businesses can actually compete in such an open market where big players can freely participate. The question remains whether small local businesses can compete with other participants in terms of quality, quantity, cost or price, especially under the scrutiny of a well-informed consumer. Nonetheless, the creation of a national competition policy encourages all economic parties, businesses and consumers alike, towards a more progressive national economy.

The passing of the Philippine Competition Act fulfills the Philippines’ obligation under the AEC which aims to create a highly competitive economic region by uniting its member states into a single market and production base. The end goal is to create a region fully integrated into the global economy. The establishment of a national competition policy not only equips the Philippines for regional and global economic integration under the AEC, but most importantly, it reinforces the Philippines as a country by addressing the issues of its national economy while promoting a competitive one at that.

Juliet Marie M. Guevara is a supervisor from the tax group of R.G. Manabat & Co. (RGM&Co.), the Philippine member firm of KPMG International.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or RGM&Co. For comments or inquiries, please email [email protected] or [email protected].

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