is the subject of my Trade Tripper column in this weekend issue of BusinessWorld:
The country has seen loud calls from the general
public to institute reforms, from the PDAF to the FOI. Among these
fashionable areas of reform is on competition policy. However, through
the years, your Trade Tripper has learned that if there’s a thing that
the public (particularly foreign businesses) wants immediately
accomplished, with zero fuss, then generally it’s best indeed to make a
fuss about it. It’s when people are emotionally (even hysterically)
demanding to rush matters that time to study it becomes a necessity.
As BusinessWorld reported (Competition Law Urged, 28
August 2013) on the East Asia Forum on competition law last week, the
consensus seemed to be that “a competition policy is considered
important for a country to grow and consider itself an advanced
economy.” Furthermore, “competition law should also be separated from
politically motivated industrial policy as the latter allows the
government to choose which industries to champion instead of letting
natural competition occur in the market.”
However, there’s an obvious need to examine the assumptions on which
such assertions are made. One assumption can be seen from President
Noynoy Aquino’s speech during the forum: “As a student of economics, I
know that monopolies are incredibly inefficient. It kills innovation.
There is zero impetus, in a monopoly, to continually improve your
product or your service, simply because you have your market cornered.”
This was disputed by the Anti-Pinoy Blog <http://antipinoy.com/; see Anti-Trust Bill to Improve Competition in Philippine Economy -- Or Otherwise>:
“When you remove the rhetoric -- it boils down to the government
wanting to increase regulation of the market under the guise of
‘promoting competition.’ Such a policy does not present any benefit to
consumers and imposes more harm. More regulations and more agencies will
not improve competition in the protected Philippine economy. It has not
worked for decades -- it’s not about to work now.”
“The myth peddled to the common tao is that unregulated markets lead to
the creation of monopolies. Therefore government has to step in to
ensure that companies will not have a coercive market monopoly. The
reality is that coercive monopolies cannot exist without government
protection, special regulations, exemptions, and subsidies.”
Nonoy Oplas, president of Minimal Government Thinkers, Inc., agrees:
“When government intervenes hard to force or pretend to attain social
equality, such intervention will naturally result in subsidizing the
lazy and irresponsible, while penalizing and over-taxing the efficient
and industrious.” For him, “fierce competition is fair competition.
Government-managed or protected competition is not fair competition.”
And I concur with his assessment that, at least for the present, the
“best anti-monopolization regulation that government can do is to have
rule of law strictly enforced.”
Indeed, as your Trade Tripper pointed out, no ban (constitutionally) on
monopolies definitively exists. Article XII, Section 19 (along with
Section 10) of the Constitution merely 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.”
And the idea that “natural monopolies” can be apt for our country,
considering the small size of our domestic market, has substantial
merit. As such, Filipinos should therefore be supportive of even larger
Filipino conglomerates. Take San Miguel Corp., for example, which,
despite its size and reach, could not really be considered possessing
monopoly power due to the nature and threat presented by global (or
regional) competition.
Claims related to predatory pricing also need to be examined. As
Anti-Pinoy explains (rightly, in my view): “This assumption can only
take place if and only 1) the predator has deep financial resources; and
2) -- if there are very high barriers to entry -- such as special
regulations, exemptions, subsidies, and protections by the State.”
Even declarations like “all advanced economies have a competition
policy” should be rendered suspect. Simply because we’re not an
“advanced economy.” Which should tell you a lot about the wisdom of
importing and imposing a regulatory framework tailored for countries
whose circumstances are not similar to the Philippines.
What Filipinos should be therefore discerning about are foreign
corporations acquiring Filipino companies or influence to the point that
monopoly powers are exercised beyond the reach of Philippine
jurisdiction. Another is the relationship that competition law has with
corruption. Finally, there’s the dire need to constrain the ill-effects
of having both political and economic power held by a select number of
families in the country.
As your Trade Tripper wrote repeatedly in the past: The issue is not
whether we should have a competition law (we should) but rather the kind
of competition law that will work effectively for the interests of
Filipinos.
