Competition law? Maybe.

was my Trade Tripper column in the recent weekend issue of BusinessWorld:

I'm not sure if people are aware of this, but if there is a piece of legislation that policy makers are going gaga over to get passed, it is not the Freedom of Information law. Rather it is the competition law, now in its present form as House Bill 1133 (partnered with Senate Bill 2282, both known as the Fair Competition Act). Unfortunately, the people pushing for this law miss the point: yes, clearly we need a competition law. But we need one that will work effectively for the interests of Filipinos.

Teddy Boy Locsin was spot on in his Sept. 4 Teditorial: “If the anti-competition law seeks to stop giant local companies from keeping local competition down and foreign competition out, then that law is a yes. But if it seeks to break up local giants now dominating the local market and getting a lion’s share of a cash-rich country after beating the foreigners who were taking all the money long ago, then it is a big, fat no.”

One fundamental problem with present competition bills is their implicit reliance on this huge assumption: monopolies are bad and government is the solution. But note, not even our Constitution sees monopolies in such light: 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.”

And as Nonoy Oplas, president of Minimal Government Thinkers Inc., correctly pointed out: “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.”

I also 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, the size of our market should lead us to appreciate the idea of “natural monopolies,” whereby maximum efficiency is derived by way of economies of scale through one or two suppliers.

As such, Filipinos should be supportive of even larger Filipino conglomerates. Take San Miguel Corp. (or PLDT or PAL), 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.

As I’ve written several times before, Filipinos should be more discerning about the strong possibility of foreign corporations sneaking up and 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.

Again, Teddy Boy Locsin (who’s not a trade lawyer but has more sense than most competition experts) gets it exactly right: “Big is better if it is Filipino because capital has a nationality,” but “big is bad if it is foreign, which will destroy what we have, milk it by big bonuses, siphon profits abroad, and make sure no Filipino ever gets big again. If foreign competition wants to break up Filipino giants, let the free market do it. Do not make a Filipino law tailor-made for foreigners do the job for them. Foreign competition does not believe in Filipino competition in their home countries. It only believes in foreign competition here and elsewhere abroad.”

Another area we need to look at is the relationship that competition law has with corruption, and thus, relatedly, the need to constrain the ill effects of having both political and economic power held by a select number of families in the country, which is something that even the latest drafts of our competition laws seem to ignore.

Because, what is the point of having trade commissions, legal procedures, and the like if in the end the judged and the judge are from the same side of the fence? Competition laws work in the United States and Europe as the people who lead in business would not be the same people who comprise government, thus serving as a check upon each other. 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.

Finally, why are the competition law drafts merely aping the texts of foreign competition laws? After all, US laws are worded generally, which is understandable as the core provisions were made a century ago. But that was followed by more than a hundred years of US jurisprudence (plus that of Europe and Japan) that we should have learned from and could have been incorporated into the draft competition law, thus giving the law more depth and precision.

We need to really put more thought in crafting our competition policy law, considering the profound effect it will have on the country’s economy and Filipino lives.