Senate anti-trust forum provides key trade insights

Senate anti-trust forum provides key trade insights

Metrofile, The Daily Tribune, 27 February 2011

"02/27/2011

Senators from the committee on trade and commerce invited noted experts from a variety of fields to share valuable insights on existing anti-trust practices in the country. According to Sen. Manny Villar, the need for such a forum cannot be overstated. “We need to cover all the bases by conducting public hearings and hosting a series of lectures, so we may all understand the intent of the law and its benefits,” he pointed out. The proposed anti-trust law seeks to penalize unfair trade and anti-competitive practices in restraint of trade, unfair competition and abuse of dominant power. Consequently, it intends to encourage competition in the market place, which will help reduce prices and increase the quality of products and services. “Our committee is dead-set on passing the bill,” Villar further noted. The senators listened to the resource speakers who provided key inputs that are expected to make the final version of the law more effective. Among them were Undersecretary Zenaida Maglaya of the Department of Trade and Industry, lawyer Anthony Abad from the Ateneo Center for International Economic Law, and prominent lawyer and consumer advocate Lorna Patajo-Kapunan. After her presentation, a number of local distributors of a multinational corporation (MNC) from the audience approached Kapunan and the senators who were in attendance. It was learned later on that these distributors were driven to bankruptcy by what they deemed to be grossly unfair practices of this MNC. “This is precisely why we need carefully-worded and well-crafted legislation,” Kapunan said in response. “Our current laws not only allow our local businessmen to be bullied and exploited, but the level of leniency actually encourages it,” she emphasized. The committee is also tackling related bills on anti-trust legislation, namely, the Competition Act of 2010, co-authored by Senate President Juan Ponce Enrile and Senators Ralph Recto and Antonio Trillanes IV, Senate Bill 123, authored by Sen. Sergio Osmeña III, Senate Bill 1838 filed by Sen. Miriam Defensor Santiago, and Senate Proposed Resolution 123 urging inquiry into cartels and monopolies sponsored by Villar."

Original article appears on Tribune Online here.

More anti-trust buzz

Click on image to enlarge and to read full article.
Originally published in People's Journal, 27 February 2011.

Senators at anti-trust public forum

Image source: Philippine Senate official website/ PRIB Photo by Albert Calvelo/ 10 February 2011

"ANTI-TRUST FORUM: Senate President Juan Ponce Enrile, together with Sen. Manny Villar, chair of the committee on Trade and Commerce, attend the second day of “Understanding Anti-Trust”, a forum presented by the Committees on Trade and Commerce, Economic Affairs and the Special Oversight Committee on Economic Affairs. Also in photo is Senate Deputy Secretary for Legislation, Atty. Edwin B. Bellen. (PRIB Photo by Albert Calvelo/10 Feb 2011) "
(Original photo release with text appears here).

*Resource speakers for the Senate anti-trust public forum were Usec Zenaida Malaya of the Department of Trade and Industry, Atty. Anthony Abad, and Atty. Lorna Patajo-Kapunan.

Anti-trust public forum press releases

Some press releases from the recently concluded "Understanding Anti-Trust" Public Forum held at the Philippine Senate last 10 February 2011:

• From the official website of the Philippine Senate: "Villar holds series of forum on Antitrust law"
  
• From the website of the Philippine Amalgamated Supermarkets Association Incorporated (PAGASA): "PAGASA at Senate Committee on Trade & Commerce"
  

Impact of vertical price restraint on Filipino consumers

Foreign multinationals in the Philippines, such as Nestle Philippines, which are in the habit of setting minimum prices for their products to be sold by local distributors and retailers, without factoring actual distribution costs, actually threaten to short-change consumers.

When the multinational sets a low price, the local distributor and retailer has to work harder to erase that market impression that a cheap product is of inferior quality. The Filipino SME, which is typically the distributor or retailer for such giants like Nestle, are pressured to more aggressively market the goods so that consumers will associate those goods with a high level of service and high quality.

In the end, unfortunately, only the manufacturer benefits from such vertical arrangements. On the part of the distributor, profit margins remain at a minimum as they have to pour in more for marketing and promotional initiatives – in addition to the distribution and operational costs. Bearing costs for these aspects also means that the distributor may no longer have the means, manpower, and capabilities to actually provide the high level of service associated with how the products are marketed. The Filipino end user, or consumer, ends up paying more for goods because of aggressive marketing, only to receive lower quality service simply because the distributor is not equipped to provide anything better in the first place.

These vertical agreements, most commonly executed through the practice of vertical price restraint, are prejudicial to all parties concerned – except for the manufacturer. Otherwise, such arrangements will just result in productive inefficiency. Productive inefficiency occurs when there is higher production costs incurred, with no competitive forces to reduce costs to the lowest possible level. This is precisely why there is such a strong and urgent need to pass a stronger and tougher anti-trust law to monitor and safeguard against such vertical arrangements.

Gaining momentum - the crusade for better anti-trust laws

"Anti-trust laws" by Ducky Paredes.

Published 22 February 2011 in Malaya. (Original article also appears online here).

"IT’S good to know that not everyone in the Senate is taken up by the investigation into the corruption in the military. While that is also important, the reality is that this investigation may just eventually peter out and, as a lot of other legislative investigations "in aid of legislation" have gone, this one could still go the way of a lot of similar investigations that never even merited an official report in the files of the Senate or the House, much less any attempt at legislation that could cure what was investigated.

Hopefully, these will lead to a time when we will be proud of an uncorrupt military, police and government. For that to happen, however, we would need five of six presidents whose holy grail is the "daang tuwid."

In the event that the one after P’Noy is not committed to taking to the straight and narrow, there goes the PH!

Thus, it is good that the Senate has not placed all of its eggs in that one basket ad that Sen. Manny Villar is trying to pass an anti-trust law through the Committee on Trade and Commerce, which he heads.

This is certainly a welcome development, as the Philippines does not have any comprehensive anti-trust law to protect business owners or consumers.

The Department of Trade and Industry (DTI), the line agency that is tasked to look after trade and business operations, as well as consumer welfare, does not have the legal ammunition to fight unfair trade practices.

This is precisely why the DTI or relevant government agencies have been ineffective in dealing with or prosecuting blatant price fixing by players in certain industries.

The Competition Act of 2010 was proposed by Senate President Juan Ponce Enrile, and co-authored by Senators Ralph Recto and Antonio Trillanes.

The public forum also focused on related bills, namely, SB 123 authored by Sen. Sergio Osmeña III, SB 1838 filed by Sen. Miriam Defensor Santiago and Senate-Proposed Resolution No. 123 by Villar urging the holding of an inquiry on cartels and monopolies. These long overdue proposed antitrust measures seek to penalize unfair trade, anti-competitive practices and the abuse of dominant power by certain institutions – a.k.a. monopolies, cartels and some big, bad MNCs.

During the forum, Atty. Lorna Kapunan, a friend and one of the champions of this issue, presented a critique on existing legislation on anti-trust. She explained that while there are some existing laws that touch on anti-trust, the provisions do not provide clear-cut guidelines or evidence to determine whether an act constitutes unfair competition, monopolistic behavior or restraint of trade.

Speaking from experience, she shared with legislators the fact that some multinational giants often act like bullies and take advantage of the leniency present in the Philippines in order to get away with violations like predatory pricing.

Kapunan bared the ugly truth that it is very hard to do business in the Philippines if you are a Filipino. Given this bitter reality, it is high time we protect the interests of local entrepreneurs simply because SMEs are the backbone of our economy.

Let’s pass stricter laws that will protect the weak – the Pinoy dealers --from the double dealing and bullying multi-nationals that this column has been writing about for the last several years."

Paul Bulcke for Nestle - too late the hero

"Nestle's CEO: I want Nestle to be respected!"

by the Equalizer.

Published in EQ PostSentinel, 21 February 2011. (Original and full article appears here).

"One of the targets I put when I defined our vision was to be trusted by all stakeholders. I don’t say ‘loved’, that’s stupid, but trusted. That’s a start.” Paul Bulcke, Nestle CEO

These days Nestlé, Switzerland’s biggest industrial company, has 283,000 employees and 456 factories worldwide, producing baby formula, breakfast cereals, coffee, chocolate, mineral water, pet foods, ready meals, dessert ingredients and more. In Britain its brands include Nescafé, Nespresso, Kit Kat, Quality Street, Perrier, San Pellegrino, Cheerios, Shreddies, Purina and Carnation. And right now, adds Bulcke proudly, Nestlé sells into every country in the world — including North Korea. From Times Online

That power can be a force for good, or not, depending on where you stand. In particular, the company has suffered continued criticism for its marketing of baby formula to Third World mothers as an alternative to breast-feeding.From Times Online

In the past, Nestlé has tended to ignore protesters. More recently it has been embroiled in a court case in Switzerland, accused of hiring Securitas, the security firm, to put spies into anti-Nestlé campaign groups.

Bulcke admits that Nestlé, respected for its research and marketing prowess, has not handled criticisms well, preferring to retreat into its own certainties — the Swiss approach. “I am not going to judge what has happened in the past, but I don’t like the results,” he says carefully.From Times Online

“Being Swiss means we do business with our own conviction and principles, and then we shut up, and sometimes that’s the problem.” Bulcke "

ATTY. LORNA KAPUNAN IN "THE MORNING SHOW" TALKS ABOUT ANTI-TRUST

Following her lecture on anti-trust in the Senate Public Forum, Atty. Lorna Patajo-Kapunan appeared as a guest at NBN 4's "The Morning Show" this morning to discuss the plight of Filipino small-to-medium enterprises (SMEs) and Filipino distributors under the existing anti-trust policy in the country.

During the show, which aired live at 7:00 a.m. this morning, Atty. Kapunan spoke of the "bullying" that Filipino SMEs have to endure under existing distributorship agreements with large multinationals (MNCs). She discussed the pending Senate bills on anti-trust as authored by Senators Sergio Osmena III and Juan Ponce Enrile. Atty. Kapunan highlighted the important thrusts of these proposed bills - the setting up of a Fair Trade Commission, a special force to monitor trade violations, and the imposition of higher and stiffer penalties.

Atty. Kapunan also mentioned how agencies like the Department of Trade of Industry has chosen to "wash" their hands off the matter, particularly with respect to a pending case against Nestle Philippines, by passing the buck to the Department of Justice. The litigator pointed out that DTI is the agency with the expertise and mandate to oversee, monitor and ensure compliance with existing trade laws.

Atty. Kapunan further compared our existing anti-trust policy with that of countries like the U.S. and Switzerland, and thanked programs such as "The Morning Show" for highlighting the problem. The host, Veronica Baluyut-Jimenez, urged the public to constantly monitor our legislators, particularly with respect to the proposed anti-trust bills, so that they do not remain merely laws "on paper." Baluyut-Jimenez likened Atty. Kapunan as David going up against Goliath (i.e. large MNCs) and lauded the lady lawyer on her crusade.

The morning news show airs at 7:00 a.m. every day and is hosted by noted broadcasters Veronica Baluyut-Jimenez and Aljo Bendijo.

A CRITIQUE OF PHILIPPINE ANTI-TRUST LAWS

Atty. Lorna Patajo-Kapunan was a resource speaker at the second "Understanding Anti-Trust" Public Forum held at the Philippine Senate last February 10, 2011. Atty. Kapunan gave a detailed and very informative talk on previous and existing anti-trust laws in the Philippines, the issues surrounding what she described as these "scattered" provisions, and the need for a comprehensive anti-trust framework. A brief outline of Atty. Kapunan's presentation during the public forum appears below:

A Critique of Philippine Anti-Trust Laws

by Atty. Lorna Patajo-Kapunan

Senior Partner

Kapunan Lotilla Garcia & Castillo Law Offices

Various Existing Anti-Trust Laws in the Philippines

• THE PHILIPPINE CONSTITUTION, Article XII, Section 19
• The Revised Penal Code of the Philippines, Article 186
• The New Civil Code of the Philippines, Article 28
• Republic Act No. 7394, the "Consumer Act of the Philippines"
• Republic Act No. 7581, the "Price Act"
• The Corporation Code of the Philippines, Section 79
• The Intellectual Property Code of the Philippines
• Republic Act No. 8479, the "Downstream Oil Industry Deregulation Act of 1998"
• Republic Act No. 7042, the "Foreign Investments Act of 1991"
• Republic Act No. 8762, the "retail Trade Liberalization Act of 2000"

Problems of the Current Anti-Trust Laws

• All laws relating to anti-trust are scattered in different codes.
• Existing anti-trust laws do not provide for clear-cut guidelines, elements/requisites or evidence to determine whether an act constitutes unfair competition, monopolistic behavior or restraint of trade.
• Lack of judicial experience in determining anti-trust laws, caused also by inadequate laws.
• Need for proper body to determine whether there was any violation of anti-trust laws.

"In the case of SEDI and FDI 2 vs. Nestle Philippines, Inc., the DTI refused to assume jurisdiction over an administrative complaint for violating Article 186 of the Revised Penal Code, which is a trade and industry law. DTI itself is confused with its jurisdiction when it ruled that the proper office to assume jurisdiction is the DOJ because Article 186 of the Revised Penal Code is a penal law."

• Codification of anti-trust laws into one statute.
• Recognition of the rise of Small and Medium Filipino Enterprises (SME) and the need for protection.
• Clearer protection against vertical agreements which have the effect of restraining trade.

• Definition of vertical price restraints and predatory pricing.
• Recognition of the disadvantage of vertical price restraint to the distributor or retailer.
• Recognition that protection from vertical price restraint is not a novel concept as other countries have protected against such form of anti-trust practice.

Proposed Bills

• Senate Bill No. 1 (Senator Juan Ponce Enrile)
• Senate Bill No. 123 (Senator Sergio R. Osmena III)
• Senate Bill No. 175 (Senator Antonio "Sonny" F. Trillanes IV)
• Senate Bill No. 1838 (Senator Miriam Defensor Santiago)
  

Filipino SMEs similar to martyred wives for sticking it out with vertical price agreements with MNCs

If it is has been established (here and here) that vertical price agreements in the Philippines are obviously huge burdens on Filipino distributors and retailers, then why do these guys stick it out with the multinational corporations (MNCs) to begin with?

Well, in the case of Nestle, its distributorship agreements usually promise market support to its local distributors/retailers. Armed with these promises, the SMEs pour in hundreds and thousands of pesos in setting up their operations, and in fulfilling their end of the distributorship agreement. Having infused so much capital to get their operations underway, it is often difficult for these Filipino SMEs to stop midway, call foul, and just back out of the whole thing. Not only would there be breach of contract involved, but these SMEs, naturally, hang on in the hope of turning a profit, and to avoid any further loss of investment. In short, their hands are tied. Plus, there is always the threat of having the multinational pre-terminating or refusing to renew the distributorship before the SME recovers from its investment.

Such vertical agreements also have an impact on consumers. From the point of view of the SMEs, once Nestle, for instance, sets a minimum price, the Filipino retailer/distributor generally has to market the goods more vigorously and creatively since lower prices are usually associated with lower quality. This is especially problematic when marketing and promotional support from the manufacture wanes throughout the existence of the distributorship agreement. So the Filipino SME, like a martyred spouse, sticks it out with the abusive other half.

Standing up for the little guy

"Standing up for the little guy"
Domini M. Torrevillas
From the Stands, Philippine Star, Opinion
February 17, 2011

Please click on picture to enlarge and view full article by Domini Torrevillas on Atty. Lorna Kapunan's crusade for better anti-trust laws.

Full text of article re-printed below:

"By any standard, lawyer Lorna Kapunan is a formidable woman. After graduating from the University of the Philippines College of Law in the late '70s, she embarked on an impressive career that has so far spanned more than three decades. Along the way, she became recognized as one of the leading litigation lawyers in the country, representing several high profile and multi-faceted cases. Her versatility has allowed her to be proficient in several practice areas, including licensing law, franchising, corporate and commercial law, international humanitarian law, family law and estate law and succession.

The thing about Lorna is this: you will never hear her talking about herself. In fact, she may feel somewhat awkward reading the paragraph above Given her remarkable credentials and achievements (including being a Ten Outstanding Women in the Nations Service awardee and a professional lecturer at the European-based International Centre for Legal Studies), many of her colleagues in the profession would be lulled into an overblown sense of self-worth. Lorna, on the other hand, is often heard saying that a person is only as good as the causes that he or she fights for. This is precisely why she currently sits in various boards and voluntary organizations and foundations.

Her latest cause has prompted many to compare her to a proverbial David standing in front of Goliath. Last week, however, Lorna was invited by Senators Juan Ponce Enrile, Manny Villar, Miriam Defensor-Santiago, and other members of the Senate Committee on Trade and Commerce to speak about what she feels is a pressing concern for Filipino entrepreneurs, Small and Medium Enterprise (SME) owners, and consumers in general.

The legislators listened intently as she outlined the unfair practices of some multinational corporations (MNCs) operating in the Philippines, and discussed the lack of legislation protecting Filipinos against these activities.

It turns out that MNCs - by virtue of their size, economic clout, profit-centeredness, or a combination of all three - often act like bullies and take advantage of the leniency present in the Philippines in order to get away with violations. In particular, it is those that are engaged in Fast Moving Consumer Goods (FMCG) that are notorious for this bullying behavior Unfortunately, as Lorna pointed out, this maltreatment of local distributors and the buying public has gone unabated because the government has been powerless to stop it.

'That's the saddest part,' she explained to friends in media later on. 'All we are to some foreign corporations are buyers and end-users. They do not seem to be interested in creating vertical employment, encouraging entrepreneurship, or forging beneficial partnerships with SMEs. It's all about profit, profit, and profit - and the ones getting the very short end of the stick are usually the distributors.'

Apparently, countless Filipino distributors have been literally driven to bankruptcy as a direct result of this so-called 'MNC abuses.' These abuses include baiting prospects with the promise of marketing and promotional support, as well as favorable in-house financing rates. A few months later, however, all support disappears into thin air. Moreover, distributors are suddenly endorsed to a third-party bank for financing (without prior notice), and saddled with rates much higher than agreed upon.

'This is very common,' Lorna said matter-of-factly. 'Now imagine how the problem compounds for the distributors when the MNCs engage in predatory pricing. In order to drive their competition out of the market, certain MNCs compel their distributors to sell goods at irrationally low prices - while keeping the company's margins intact, of course - just to move stocks. They do this in a number of ways: threatening to terminate contracts if quotas are not met, instigating price wars among distributors, or assigning problem accounts directly to their distributors. It's no wonder that they eventually find themselves in a hole they can't get out of.'

But surely the Department of Trade and Industry (DTI) would step in during such instances, right? 'Sadly, no," stated the noted lady lawyer. 'Many distributors have actually filed complaints with the DTI, but they have all received the same reply. Evidently, the agency is fully convinced that cases like these are not within their jurisdiction, if you can believe that.'

The good news is that, according to my reporter-friends, Senator Enrile was especially attentive during Lorna's presentation. Small wonder, considering that Manong Johnny is a principal co-author of Senate Bill No. 3197, or the Anti-Trust Bill. As more legislators hear Atty. Kapunan's invaluable inputs on the topic, this will surely create a critical mass for her crusade.

'Crusade sounds a bit too romantic,' Lorna said with a smile. 'I prefer to think of it as merely standing up for the little guy, and making sure that our fellow Filipinos are not bullied.'

- Domini M. Torrevillas, "Standing up for the little guy", From the Stands, Philippine Star, February 17, 2011

Villar holds series of forum on Anti-trust law

Original article appears here.

"Villar holds series of forum on Anti-trust law
Press Release
February 10, 2011

Sen. Manny Villar today hosted the second installment of a series of discussion to better understand the anti-trust law now being studied by the Committee on Trade and Commerce. "I would like to cover all the bases by conducting public hearings and hosting this series of lecture so we may all understand the intent of the law and its benefits," Villar said.

The proposed Antitrust law seeks to penalize unfair trade and anti-competitive practices in restraint of trade, unfair competition and abuse of dominant power.

Villar said the law will encourage competition in the market place which will help reduce prices and increase the quality of products or services and gave the assurance that his committee is dead set on passing the bill.

Usec. Zenaida Maglaya of the Department of Trade and Industry gave a presentation expounding on the need for an antitrust law in the country during "Lecture II: Understanding Antitrust" held Thursday morning at the Recto Room.

Maglaya underscored the need to enact a Competition/Antitrust Law to promote investment and facilitate trade among neighboring countries.

Atty. Anthony Abad, managing director, Trade Advisory Services/ Ateneo Center for International Economic Law explained the United Nations Conference on Trade and Development (UNCTAD) Model for Antitrust Law while Atty. Lorna Patajo-Kapunan presented a critique on existing legislations on antitrust.

Abad said it is fortunate that the 15th Congress is prioritizing the Antitrust bill, as this is one piece of legislation that will have a transformative effect on the way business is done in the country.

For her part, Kapunan recognizes that there are antitrust provisions scattered in different laws like the Revised Penal Code, New Civil Code, Consumer Act of the Philippines, etc. but argued that these provisions do not provide for clear-cut guidelines or evidence to determine whether an act constitutes unfair competition, monopolistic behavior or restraint of trade.

Reactions on the presentations were given by Atty. Geronimo Sy, assistant secretary, Department of Justice; Atty. Rod Libunao, legal counsel, Chevron Philippines; Mr. Reiner Aaron Villasenor, student leader, San Beda College; and Atty. Jose Cabrera, governor, Integrated Bar of the Philippines.

Villar said the country needs a comprehensive antitrust law that will complement the prevailing economic conditions and put in place the atmosphere for companies to deliver better goods and services to consumers.

"We need this law because we want to prohibit anti-competitive practices like monopolies and cartels," he added.

The first forum was held last week where Senate President Juan Ponce Enrile, who co-authored with Sens. Ralph Recto and Antonio Trillanes IV Senate Bill No. 1 or the Competition Act of 2010, shared his insights on the matter.

The committee is also tackling related bills on antitrust legislation namely, SB 123 authored by Sen. Sergio Osmena III, SB 1838 filed by Sen. Miriam Defensor Santiago and Senate Proposed Resolution No. 123 urging inquiry on cartels and monopolies sponsored by Villar."

New anti-trust law should tackle the unfair practice of vertical price-fixing

Since there has been much buzz about the need to pass a tougher anti-trust law in the Philippines, our legislators should pay special attention to the issue of vertical price-fixing. Also known as vertical price restraints, this occurs when a manufacturer sets a minimum price for its distributors and retailers, coupled with the threat of refusing to deal with the manufacturer’s distributor or retailer when the latter fails to charge at least the minimum prices set by the manufacturer.

In these kinds of vertical arrangements, the manufacturer is, in effect, a playground bully who leaves the smaller, more helpless classmates with no choice but to turn over their lunch money. Naturally, in this scenario, the smaller, more helpless classmate is the Filipino SME who typically act as the distributors and retailers for large multinationals such as Nestle, P & G, Johnson & Johnson, and the like.

Vertical price agreements fall within the ambit of predatory pricing which is generally considered illegal across most countries since it obviously hampers free competition. In predatory pricing, prices are set by a company which are below previous rates and below average costs. Nestle Philippines, for instance, has existing agreements wherein a minimum price is set (which its distributors and retailers are supposed to follow when selling the Nestle products to the end users) which does not factor in the average costs it takes for the Filipino SMEs to distribute and get these products to the consumers in the first place.

Why then do these Filipino SMEs enter into such agreements in the first place? The answer is because there is often the promise of initial marketing and promotional support by Nestle or the multinational, and because these small Filipino companies have already put in much capital to lay down the infrastructure for the business. They hang on in the hopes of turning a profit. Given the obvious strength multinationals such as Nestle wields compared to Filipino SMEs, then the only way to deal with such “bullies” is to pass a tougher anti-trust law.

Need for new anti-trust law to protect Filipino SMEs from predatory pricing!!!

Predatory pricing seeks to eliminate competition. It is unfair and illegal. It hampers free and fair competition because sale of products at low prices causes a loss, with the only possible rational for such low prices is the elimination of the company’s competitor in the long run and the capture of market share.

One wonders why this should matter when the loss is perceived to be borne by the company which set the low price rates to begin with. In actual practice here in the Philippines, this loss is never borne by the company (i.e. the multinational) but by its distributors and retailers (i.e. the Filipino SMEs). Multinationals such as Nestle Philippines sets a low price without considering previous price bulletins it has imposed on the Filipino SMEs (supposedly their “partners” in “growth” and “profit”), and, more importantly, without considering average total costs of distribution. These distributors/retailers have to eke out whatever minimal profit they can get from these arrangements, and it is not uncommon for these Filipino SMEs to operate at a loss.

Really, the most alarming aspect in the spread of vertical price fixing agreements in the Philippines is its impact on local SMEs. The common scenario is that you have a large multinational such as Nestle Philippines who has a distributorship or retail agreement with a Filipino SME. When this kind of company makes use of vertical price fixing agreements, the Filipino SME has no choice but to sell the Nestle products, for instance, to consumers at low prices – with complete disregard as to the actual costs borne by the SME to actually get or distribute these products to the market.

This is out and out bullying. As a country, we will never be able to move beyond providing distributorship and BPO support to these multinationals unless there is greater protection for the Filipino SMEs!!!

Lawmakers call for tougher anti-trust law

There has been much noise from our lawmakers on the need for a tougher anti-trust law in the Philippines. Rep. Eduardo Gullas, of Cebu, has been very vocal about pushing for an anti-trust law that would protect both consumers and businesses from wrongful and unfair competition in commerce. Senator Sergio Osmena III and Senator Juan Ponce Enrile have drafted bills for a stronger anti-trust policy and have been holding public forums for greater understanding of our current anti-trust issues. This is no doubt in response to President Noy Noy Aquino’s call for Congress to pass a new anti-trust law in his first State of the Nation Address last July 2010.

It is high time too. In truth, there is no comprehensive anti-trust policy and regulation in the country – at all. While there have been much reforms by way of liberalization, deregularizaton, and privatization to encourage free trade and open markets, anti-trust regulation in the Philippines is unfortunately completely behind compared to our foreign counterparts.

Rep. Gullas has stated that he favors new legislation patterned after the tough anti-trust laws of the United States. Actually, anti-trust laws in European countries such as Switzerland crack down even more than U.S. courts with respect to certain practices. Take the concept of vertical price-fixing, also known as vertical price restraints, which is not unfamiliar in Philippine economy.

The U.S., Switzerland and the Philippines adhere to the Rule of Reason doctrine in determining whether a company is liable for vertical price-fixing. However, the U.S. takes on a more liberal approach whereas Switzerland has more stringent standards and even has a Competition Commission which determines whether there is vertical price restraint involved. In the Philippines, there are no such determinants, and hardly if any case law providing for guidelines on how to apply the Rule of Reason.