The Year Ahead for Market Competition
by Arsenio M. Balisacan, PhD
January 9, 2019
In last week’s column, I shared the key accomplishments of the Philippine Competition Commission (PCC) in 2018, which we consider as the first full year of the country’s new competition policy regime. Throughout last year, the commission placed the consumers, along with promoting competitive processes, at the heart of its endeavors.
But, while we have accomplished much within a short amount of time, many new and continuing challenges remain to be hurdled by the commission under its three broad functions of competition enforcement, merger review and competition advocacy. These challenges shape the commission’s priorities in 2019.
First, we recognize that in an archipelagic economy where oligopolies and highly concentrated markets abound, expectations are mounting for the commission to deliver more and better competition enforcement. Our goal this year and onward is to effectively investigate anticompetitive agreements and conduct, such as price-fixing and bid-rigging. Deterrence requires that the threat of penalties is truly felt and that the detection and prosecution of infringements are effective.
In carrying this out, our enforcement action would be informed not only by the complaints or queries we receive, but also by the prioritization framework that the commission has developed. In this regard, based on the findings of our issue paper on the manufacturing sector, in tandem with other considerations (e.g., the relative importance of the good or service on consumer welfare), we have identified the following priority sectors for competition analysis and enforcement in 2019: logistics supply chain, corn milling and trading, refined petroleum manufacturing and trading, sugar, and pesticides. These are in addition to the ongoing work on priority sectors launched in 2018.
Having identified these priorities, we are keen on implementing three key components this year to bolster and complete our enforcement framework. This January 2019, we will be rolling out the commission’s Leniency Program. We expect this whistle-blower-type program to significantly improve our ability to detect cartels and increase the number of cartel investigations in the coming years.
In addition, we will soon implement our Rules on Forbearance and on Inspection Orders, which will enable us to work more efficiently. The former will allow an entity or group of entities to be exempted from certain provisions of the Philippine Competition Act under very specific circumstances and stringent conditions. The latter will govern our conduct of dawn raids (an addition to our arsenal of investigative tools).
Fortunately, the commission is not alone in its mission to enforce the law. With the Office of the Ombudsman and the commission on Audit as key partners, the commission has laid the groundwork for the adoption of a tripartite action plan and the formal constitution of a joint task force to investigate bid-rigging in public procurement. As the economy weathers domestic and global headwinds and the government ramps up its “Build, Build, Build” program, ensuring a clean selection process in public procurement is key to extracting the best value for our taxpayers’ money.
Upholding fairness in the market is one of the principles enshrined in the PCA. In this regard, the credibility of PCC rests on its ability to swiftly and thoroughly detect, investigate, and prosecute anticompetitive agreements and conduct.
Second, for mergers and acquisitions, we shall adopt a more simplified notification process to further expedite the review of non-problematic merger cases and facilitate the ease of doing business. We will continue our efforts to proactively monitor non-notified transactions and evaluate merging parties’ compliance with their voluntary undertakings. This means we can constantly check the market power of growing and dominant firms and, at the same time, focus on transactions that pose greater competition concerns.
Last, one persistent challenge has been the general population’s low level of awareness and understanding of the commission and the PCA, as well as the principles of healthy market competition. When consumers, businesses, and even government entities, including government-owned and -controlled corporations, are uninformed, anticompetitive conduct and misinformed public policies may proliferate.
This 2019, the commission shall become more proactive in its engagement with Congress and sector regulators by reviewing bills, existing laws and regulations that restrict competition in various markets. We hope to organize a multiyear workplan utilizing a quick-response mechanism, tapping competition and sectoral experts in the provision of targeted, timely, and informed comments on legislative proposals and executive issuances. We recognize that competition advocacy is a cost-efficient way of preempting anticompetitive conduct.
As the PCC expands its portfolio of cases and advocacy efforts in 2019, we reaffirm our commitment to our vision of becoming a world-class competition authority. Indeed, we have set a lofty goal, yet it is attainable. This goal provides us the impetus to work at the frontier, aiming to attain the standards set by model competition authorities in other jurisdictions.
The PCC’s 2019 marching order is set. We step into this year with hope and renewed vigor to foster competitive processes in the markets of goods and services.
Dr. Arsenio M. Balisacan is the chairman of the Philippine Competition Commission and a professor of economics (on secondment) at the University of the Philippines. Prior to his appointment to the commission, he served as socioeconomic planning secretary and, concurrently, director general of the National Economic and Development Authority. He also served as dean of the School of Economics in UP Diliman and Director-Chief Executive of Searca.
(Originally published on Business Mirror’s Competition Matters column on January 19, 2019 here.)