is the subject of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld:
Back to trade: BusinessWorld recently reported that "foreign business groups want Congress to tread with caution as it works on drafting an antitrust law, saying a badly crafted measure could restrict business instead of upholding fair competition. In a letter to the House of Representatives trade and industry committee dated Oct. 13, the American and European chambers said definitions of monopolies needed to be further narrowed, as should criteria for unfair price fixing, since provisions in current bills were too vague.’
"Most of the bills have drawn up criteria that would likely result in too many companies being labeled monopolist or holding a dominant position. The standards should be both rigorous and clearly drawn,’ the two groups said. ‘Otherwise, many companies ... will have the further burden of complying with new restrictions on monopolistic behavior.’"
They have a point, though I’m not sure if the rationale or purpose is exactly the same. As I wrote in an article last year, what Filipinos should be concerned about is the possibility of foreign corporations sneaking up in acquiring Filipino companies or influence to the point that monopoly powers are exercised from beyond Philippine jurisdiction, constricting Filipino entrepreneurial efforts and damaging local consumer interests. The question is how to enable competition to work for the interests of the country.
Competition policy, in its simplest form, primarily deals with the state of competition internally, that is, with regard to the state of competition within a country’s borders. However, what Philippine policymakers and lawmakers should consciously focus on, considering the present economic situation, is competition policy viewed from an international perspective, particularly when monopolies or cartels reach across borders and where price-fixing is done not within a single country but in a number of such. This is a highly complex but profoundly significant matter that needs to be recognized.
Interestingly enough, this news regarding renewed interest in competition laws was followed by news regarding the open-skies policy, as reported by BusinessWorld: "Cabinet officials have recommended adoption of an open-skies policy and President Benigno C. Aquino III is open to considering the proposal. ‘We recommended it to the President and he wants to see a road map of the full implementation of the liberalization of civil air policy,’ Tourism Secretary Alberto A. Lim told BusinessWorld during the weekend. Approval, Mr. Lim said in a phone interview, will streamline the process for foreign airlines wanting to increase seat capacity. ‘The consequence [of easing policy] is that instead of the government panels having to negotiate increase in capacity, foreign airlines may apply for a waiver or an air service agreement with the CAB (Civil Aeronautics Board),’ Mr. Lim said." This requires better thinking.
Local carriers are against the open-skies policy. And they very well should. We must emphasize really that, constitutionally, no ban on monopolies definitively exists and even more with regard to the probability of a regional or international monopoly. Article XII, Section 19 (along with Section 10) of the Constitution does provide 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." (italics supplied) This could serve as justification for a company succeeding through merit in an industry that encourages a "natural monopoly," defined by Wiki (yes, I know) as occurring "when, due to the economies of scale of a particular industry, the maximum efficiency of production and distribution is realized through a single supplier."
The probability that the concept of "natural monopolies," considering the small size of our domestic market, is applicable is with merit. If anything, therefore, Filipinos should perhaps be supportive of an even larger Filipino conglomerate. A San Miguel Corp., for example, despite its size and reach, could not really be considered as possessing monopoly power due to the nature and threat presented by its external (i.e., foreign) competition.
What Filipinos must be concerned about instead is the possibility of foreign corporations sneaking up in acquiring Filipino companies or influence to the point that monopoly powers are exercised from beyond Philippine jurisdiction, constricting Filipino entrepreneurial efforts and damaging local consumer interests. The problem faced by Philippine regulators in this regard (aside from the fact that there is no central antitrust body existing) is that local laws on the matter are either outdated, ambiguous, or narrow in scope.
In any event, competition policy is not bereft of opportunities for amusement. Last year’s Senate Bill 3197 (Competition Act of 2009) made use of the term "historic accident," which is curious for a law that should be forward looking. However, the funny thing here is that three domestic industries which are under varying degrees of trade remedy protection from the government -- if trade remedy petitions data are accurate, the local ceramics industry has around 50% local market share, float glass (85%), and soap raw materials such as STPP (90%) -- are, apparently, "monopolies."