Anti-trust and corruption

is the subject of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld:

If there’s one thing that foreign businesses hope to pass through Congress without much fuss then it must be the long-sought competition law. Which probably means Congress (and the rest of country) should indeed make a fuss about it. The fact that the imports/exports situation of our country remains uncertain up to the next year is no reason to rush any competition/anti-trust legislation. The question is not whether we should have a competition law (we should) but rather to have a competition law that will work primarily for the interests of Filipinos.

As I’ve continuously written, Filipinos should be more discerning about the strong 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. Seemingly, Section 3 of Senate Bill 3197 (Competition Act of 2009) interestingly describes the enforceability of the intended law to be “within the territory of the Republic of the Philippines x x x including those that result from acts done outside the Republic of the Philippines.”

The fact that jurisdiction is had over offenses committed within the Philippines is par for the course -- territoriality being a long accepted jurisdictional premise within Philippine law. However, the latter portion of Section 3 is fascinating, flirting as it does with the probability of jurisdiction being extended by reason of either the protective principle or the passive personality principle of jurisdiction (the former being embodied, as an exception within our body of criminal law and jurisprudence, in Article 2 of the Revised Penal Code). It could also be indicative of Philippine acceptance of the emerging “effects doctrine” (more like that of objective territoriality doctrine), which is being increasingly employed by the US (e.g. the Helms-Burton and Sarbox laws, as well as the strange case of US vs. Alvarez-Machain).

Continuing from this line of thought would be the relationship of competition law with corruption. 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, the economic situation of the country is a bit different from, say US or the EU. There, the people who lead in business would not be the same people who comprise government. While undoubtedly relationships exists between the two groups in any country, that is a far cry from having the same families actually in control of both business and government. Which is the case in the Philippines: any cursory reading of our history would show that the same names in government and business appear over and over and over and over again. The same families would side with the Spanish against the Katipunan, collaborate with the Americans, then collaborate with the Japanese, then collaborate with each other in utter disregard of the interests of the country. It is no accident that the most heinous and damaging instances of corruption in the country were at the instigation or committed by these so-called “elite” families.

Thus, the use of the term “historic accident” in SB 3197 is curious for a law that should be forward looking. Also interesting is that when one looks at three domestic industries which are under varying degrees of trade remedy protection from the government -- if recent 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 under SB 3197, “monopolies.” Note that Section 6 of SB 3197 provides that: “It shall be unlawful for any firm to willfully monopolize, or knowingly attempt to monopolize, x x x Provided, That, a firm that has at least fifty percent (50%) of the relevant market as found and certified by the Department of Trade and Industry or the Concerned regulatory agency shall be deemed a monopoly.”

While there remains the fact that (as found by law professors David Trubek and Alvaro Santos) “the connection between eliminating corruption and ‘development’ remains obscure” -- thus demonstrating the idiocy of basing a government program on a slogan -- nevertheless, corruption is clearly not a victimless crime. Vast amounts of money that could have been used for education or health are instead diverted to less altruistic enterprises. It may have even diverted potential investments away from the country. Deloitte’s 4th annual “Look Before You Leap” found that “63 percent of respondents reported that the FCPA and anti-corruption issues caused their companies to renegotiate or pull out of planned business relationships, mergers or acquisitions over the last three years.”

The point here is that while indeed a competition law could be a valuable tool for the country’s development, we should take care it doesn’t get wasted due to lack of vigilance. For all we know, the proper targets of such a law are those publicly and loudly advocating for it.