Competition law in times of natural disasters
By Atty. Emerson B. Aquende
December 9, 2020

 

The successive typhoons that devastated large swathes of Luzon in November, and the massive flooding that recently inundated Metro Manila and Cagayan province have once again raised to the national consciousness the vulnerability of the Philippines to natural disasters. To a large part, geography is to be blamed for this curse. The entire east coast of the country faces the Pacific Ocean, which sends our way 20 typhoons every year on the average, at least five of which are destructive.

Coming from the Albay province, I am no stranger to frequent natural disasters. Super typhoons, landslides, flooding, earthquakes and volcanic eruptions are regular fare for us living at the foot of Mayon Volcano, whose majestic beauty is equaled only by her deadly reputation as the most active volcano in the Philippines with 52 eruptions to her credit since the year 1616. Albay, with the rest of the Bicol provinces, straddles also the typhoon alley where super typhoons birthed by the warm ocean in the months of October, November and December cuts across the archipelago on a diagonal northwest path.

For those of us who live with natural disasters, we know that every natural disaster leaves a lengthy trail of misery in the lives of those impacted. The survivors of natural disasters have to endure lengthy periods of recovery and rebuilding even as they are beset with a host of difficulties and deprivations. Water and electricity services may take weeks (or even months) to be restored in the disaster area, leaving everyone scrambling to buy electric generators and bottled drinking water. Roads may be impassable for days due to landslides, fallen trees and electric poles, or worse, destroyed bridges isolating local communities for a time. Business operations of banks, grocery shops, water refilling stations and other commercial establishments may be interrupted because of damages incurred and employees unable to work, resulting in shortages of basic necessities and prime commodities.

As is most often the case in post-disaster situations, prices of food, other basic necessities, and prime commodities, including building materials, may surge to unjustifiable levels because of price gouging. In many instances, the increase in post-disaster prices are justifiable due to higher input costs of traders and retailers, such as added expenses from cleanup, higher transportation charges, increased labor expenses, and similar legitimate factors. However, there is also no denying that many traders and businessmen will take advantage of the chaos in the market that follows natural disasters to generate more profit just because they can.

The adverse impact of price gouging can be magnified several times under a post-disaster situation. It is particularly injurious to those who belong to the lower income groups who may be denied access to basic necessities and prime commodities because prices have risen beyond their means. Unless the government is able to stabilize the markets immediately, price gouging may worsen the suffering of survivors due to hunger and other deprivations.

While the Price Act allows the government to use price freeze and price ceilings as immediate remedial tools to suppress price gouging, it should not be overlooked that these are not the only tools available in its arsenal. In fact, there are more potent measures that the government can deploy to suppress the more injurious types of price gouging—the kinds committed by cartels, and those practiced by dominant firms and businesses.

The Philippine Competition Act (PCA) offers alternatives, and perhaps even more appropriate remedies to suppress post-disaster price surges. Admittedly, anti-price gouging measures like price freeze and price ceilings are attractive to deploy because these are very visible tools. However, implementing price freezes and price ceilings can be administratively difficult, given the resources needed to enforce it effectively. Worse, it may actually be counter-productive in the long run because these interventions may in fact distort competition in the market. It is argued that allowing post-disaster price increases will result to increase in production (to meet demand), incentivize outside firms to bring in additional supply (because of attractive prices), promote efficient use of in-demand products, and even encourage businesses to stockpile supplies in anticipation of impending natural disasters. Capping prices may produce the reverse results, and even lead to rationing and long queuing.

I even hazard to argue that the PCA offer better tools to address price gouging than price freeze and/or price ceilings because the former is geared towards eliminating anti-competitive conducts and restore market efficiency. Sections 14 and 15 of the PCA, which deals with anti-competitive agreements and abuse of dominance can be better employed as they do not adversely affect, rather aid in, the proper functioning of the market.

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Comm. Emerson B. Aquende is the newest member of the Philippine Competition Commission. Before joining the PCC, he headed the Legal Education Board, the government agency regulating legal education in the country. He has gained experience in insurance and finance as board director in the United Coconut Planters Life Assurance Corp., UCPB General Insurance Co., Inc., and its various subsidiaries. He practiced law as a litigation attorney, and has accumulated more than 22 years in the academe, 14 years of which as the law dean of the University of Santo Tomas-Legazpi. He currently teaches law in the University of the Philippines College of Law.

(Originally published on Business Mirror’s Competition Matters column on December 9, 2020 here.)