Chances and choices: Lotto and ‘siling labuyo’
by Atty. Amabelle C. Asuncion
October 10, 2018
A testament to the unique Filipino trait of having fun even in adversity, the recent headlines on rising prices of rice and fuel are interspersed with updates on the billion-peso lotto jackpot. The record jackpot has attracted habitual gamers and first-time bettors alike, including celebrities and politicians. With fingers crossed, bettors divine the six lucky numbers based on birthdates, anniversaries, age and other numbers that bear some meaning in the bettor’s life. Bets range from P24 to P22,000+. Some pin their hopes on winning while others simply try their luck. Regardless of the motivation, bettors await the results with optimistic enthusiasm.
As a game of chance, lottery makes no guarantee of winning; the only assurance is that the numbers will be drawn fair and square. Thus, while it cannot guarantee winning, it does promise a fair chance of winning, of course depending on the amounts and number of bets placed. Win or lose, such assurance allows bettors to hope, thus keeping the game alive through the years.
Establishing a business is like betting on lotto. The chance of earning entices businesses—old and new, big and small —to try their luck and compete with other businesses. Business owners employ different strategies and invest varying amounts, depending on capacity and appetite. The prospect of winning motivates the neighborhood sari-sari store owner as much as the business tycoon.
Like lotto, competition cannot guarantee success; however, it does ensure fair chances for all those competing. If this promise is kept, businesses will continue to crack the winning combination. Even where a jackpot is won, there is always a new draw and another jackpot to be won. Amid economic uncertainties, people turn to games of chance because these offer a chance of improving their lot, even if the gamble is risky. Similarly, people venture into business for an opportunity to earn. This opportunity can only be real if everyone will play by the rules. In the same way that lotto cannot afford to be smeared by allegations of rigging, competition must be free from manipulation. However, the integrity of the game also rests on the gamers. A bettor who expects the system to be fair is also expected to play fair. For competition to be fair, businesses must play fair. Otherwise, there will be no point in playing and the market will fail.
Aside from rice and fuel, the price of siling labuyo skyrocketed to an unprecedented P1,000 a kilo. Siling labuyo or bird’s eye chili is used for spicy Filipino dishes like Bicol Express, laing, kinilaw, caldereta, etc. Siling labuyo used to be affordable that it could be given for free to diners to spice up their soy sauce dip. With the price increase, consumers scrambled for ways to cope.
Carinderia owners resorted to using less quantities while bigger restaurants looked for cheaper sources abroad. Still, others looked for alternative spices that could give the same heat to their dishes for a lesser price. Some of the substitutes were sweet and chili pepper, bell pepper, jalapeño, paprika and black pepper. The quality of heat, price and availability vary compared to the siling labuyo, making some of them more likely substitutes than others.
For example, black pepper provides less heat than siling labuyo and may not be a good substitute for Bicol Express. Jalapeño or sweet and chili pepper may be good substitutes in terms of quality of heat. If the prices are comparable to siling labuyo (prior to the increase) and the produce easily available, consumers may switch to these alternatives. Consumers can cook their spicy sisig using these cheaper substitutes. This means siling labuyo, jalapeño, and sweet and chili pepper are substitutable.
In competition parlance, substitutable goods are considered part of what is called the same “relevant market.” Defining the relevant market is the first step in competition analysis. However, more than an academic analytical tool, “relevant market” represents the plethora of choices available to consumers to answer a need. In the example, the consumer willing to spend a certain amount can choose from siling labuyo, jalapeño, and sweet and chili pepper for spice needs. If one spice is unavailable or increases in price, the consumer can switch to substitutes to fulfill her need. The more substitutes, the more options for consumers; the more substitutes, the more suppliers vying for the patronage of consumers. This would translate to more vigorous competition, to the benefit of consumers. But if none of the alternatives can substitute for siling labuyo, then they do not belong to the same relevant market. In such a case, siling labuyo may be a relevant market on its own. So, if siling labuyo prices increase, consumers would have to absorb the increase. Limited or absence of substitutes could lead to greater market power of siling labuyo suppliers and possibly abuse of such power, to the detriment of consumers.
Therefore, relevant market indicates the options available to consumers and sets the stage for competition among suppliers. What competition policy seeks to do is ensure that consumers will benefit from multiple choices at affordable prices, and suppliers will compete fairly. Where the relevant market is less competitive, competition policy guards against monopolistic or abusive behavior of suppliers enjoying market power. In short, competition law lets the consumer savor spicy Filipino food at reasonable prices, with or without siling labuyo.
Before her appointment to the Philippine Competition Commission (PCC), Commissioner Amabelle C. Asuncion was engaged in corporate and commercial practice and served as chief legal counsel of a top company and a corporate partner of a law firm. She was also previously involved in legislative, law and policy reform, advocacy, and adjudication work. Commissioner Asuncion has a Master of Laws degree (with distinction) in International Legal Studies from Georgetown University Law Center in Washington, D.C., and was admitted to the New York bar.
(Originally published on Business Mirror’s Competition Matters column on October 10, 2018 here.)