(King) crab mentality
by Atty. Amabelle C. Asuncion
June 26, 2018
I first learned about “crab mentality” back in elementary while studying history. It is a bad trait unfairly ascribed to Filipinos and considered a formidable obstacle to their success.
Crab mentality involves pulling down anyone who achieves or is about to achieve success greater than yours. This behavior takes its name from how crabs scramble to get out of a boiling pot by clambering on top of the others. This has the effect of crabs pulling each other down so that no one escapes, and everyone ends up on the dinner table.
I remember how laughable the concept was and did not believe it to be real. Fast-forward to this day, and I realize that crab mentality partly explains the state of market competition in the Philippines. The boiling pot represents the market, while the crabs are the players competing to get to the top. Crab mentality creeps in and destroys competition, to the detriment of the market. In this situation, the players are of similar size and might, with those who are behind engaging in unfair conduct to pull down the others who are ahead.
There is another version of crab mentality, which I dub “king crab mentality.” In this second situation, a king crab that has reached the top flicks the smaller crabs back to the bottom of the pot to prevent them from getting to the top. This exemplifies what the Philippine Competition Act (PCA) considers abuse of dominant market power.
Abuse of dominance involves a firm holding a dominant position in the market and behaving in a way that substantially lessens competition. It is not wrong to be a dominant player; in the same way that it’s not a sin to be a king crab. However, flicking smaller crabs back to the bottom of the pot is another matter—this is abusive conduct.
Such king crab mentality may come in the form of unfair pricing and exclusionary behavior against competitors. An example of unfair pricing is selling below cost or at artificially low prices to drive a competitor into bankruptcy.
Exclusionary conduct includes imposing barriers to entry or preventing competitors from growing. Offering special discounts to a customer who buys all or most of their supplies from you can be abusive conduct.
Some businesses engage in these practices, probably without realizing that they are potentially anticompetitive. The PCA recognizes that some of these practices can be legitimate business strategies beneficial to consumers. For instance, tying and bundling products may prove to be a good deal for customers. Likewise, offering discounts would not be anti-competitive per se.
The law doesn’t prohibit legitimate business strategies in acquiring, maintaining or increasing market share; nor does it penalize success. What the law forbids is a dominant player behaving in a way that lessens competition. The law presumes a “special responsibility” on the part of dominant firms to act in accordance with the basic tenets of competition.
A firm with a market share of at least 50 percent is presumed to be dominant. Other factors that determine dominance are the number and strength of competitors, barriers to entry, customers’ ability to switch to other goods or services, and competitors’ access to inputs. These factors are relevant because a dominant firm is likely to exercise a multipronged power: over its competitors, over customers and on the relevant market. Considering these factors, it is easy to understand why and when the various behaviors mentioned above may be abusive.
To be sure, the king crab is not expected to pull up the smaller ones to the mouth of the pot but instead is presumed to maintain its position. Again, there is nothing wrong with this. What the law guards against is the king crab pushing the smaller crabs back to the bottom of the pot, putting up barriers or preying on their lesser brethren. Allowing these could lead to the demise of the entire market, to the prejudice of consumers.
Many find it difficult to understand competition law, much less abuse of dominance. It would be instructive to read Robert Fulghum’s book, All I Really Need to Know I Learned in Kindergarten. If my elementary years taught the vice of crab mentality, Fulghum’s book taught the virtue of fair play in kindergarten. Take these lessons and apply them to your harried business lives. I am sure these will hold true, clear and firm.
Amabelle Asuncion is a commissioner of the Philippine Competition Commission. Before this, she 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. Asuncion has a Master of Laws degree (with distinction) in International Legal Studies from Georgetown University Law Center in Washington, D.C. and is admitted to the New York bar.
(Originally published on Business Mirror’s Competition Matters column on June 26, 2018 here.)