Competition policy in 2020: Steadfast amid the crisis
By Arsenio M. Balisacan, PhD
13 January 2021
Indeed, the pandemic has upended the world’s economies in ways unprecedented. Before the crisis, the World Bank projected the Philippine economy to grow by 6.6 percent in 2020. Now, the latest estimates show the country’s GDP falling by 8.1 percent.
Despite the immense challenges we faced in 2020, the Philippine Competition Commission (PCC) has remained steadfast in its commitment to protect fair market competition and consumer welfare.
At the start of 2020, the PCC sought to roll out a more robust competition regime, particularly on the enforcement side. Then the pandemic came, and amid the ensuing crisis we find this thrust as being even more crucial in safeguarding competition.
Mindful of those who might take advantage of the pandemic-induced crisis, we set up a dedicated channel for receiving Covid-19 related complaints. We intensified our conduct of investigations on possible anti-competitive agreements and behavior, especially in relation to the trade of essentials. In 2020, we received 162 queries and complaints, resulting in the commencement of 8 preliminary and 5 full administrative investigations. These particularly concerned water utilities, Internet services, retail associations, and poultry.
Further, the PCC’s Enforcement Office (CEO) issued a Statement of Objections on its first cartel case last February. After initiating an investigation when the National Home Mortgage Finance Corp. sought a review of its policies, our CEO charged a pool of insurance companies and NHMFC for entering into anti-competitive agreements for the exclusive provision of mortgage redemption insurance (MRI) to its account holders for almost four decades. The exclusive arrangement effectively deprives NHMFC and loan borrowers from getting MRI coverage from other providers that may offer better terms at lower rates. This case is still under adjudication by the PCC, and we will ensure its proper and careful examination, given its implication on the provision of better financial services to thousands of NHMFC account holders, which include low-cost and socialized housing loan borrowers.
Cognizant of the need for urgent and effective stimulus measures, we also staunchly advocated pro-competitive solutions to the daunting tasks for recovery. We firmly presented our positions on the various stimulus bills pending in Congress, including the Bayanihan to Recover As One Act (Bayanihan II) passed last September. Unfortunately, Bayanihan II effectively suspends compulsory notification for mergers and acquisitions (M&As) for two years and our conduct of motu proprio review on non-notifiable transactions for one year.
Although we prefer to exercise a more in-depth review due to increased appetite for M&As given the recession, we do recognize the need for regulatory relief during these times. Despite the constrainst, we have continued exercising due diligence in our reviews, monitoring and encouraging the private sector to work with the Commission before the consummation of any M&As. This is to avoid the difficulties associated with their possible unwinding once the PCC regains its full merger review powers.
To complement recent moves by Congress, we signed a Joint Memorandum Circular with the National Economic and Development Authority last July for the immediate adoption of the National Competition Policy. The NCP aims to steer the policies of all national government agencies, government-owned or -controlled corporations, and local government units toward the promotion of fair market competition—a huge step for mainstreaming competition principles in the whole-of-government.
The PCC also played an instrumental role in the Supreme Court’s landmark decision last August that found the nationality-based restrictions required for construction firms unconstitutional. The SC extensively cited PCC’s amicus curiae brief in its ruling that the licensing rules effectively bar the entry of foreign contractors and were anti-competitive. This December, on the SC’s instruction, we submitted another brief to respond to a Motion for Reconsideration. Our stand remains the same—foreign participation in the sector will make it grow, lead to lower costs, and generate positive spillover effects across sectors.
Fully aware of the benefits of collaboration, the PCC entered into formal agreements with the Philippine Chamber of Commerce and Industry and the Hong Kong Competition Commission. Through these partnerships, we expect to further cultivate a culture of robust competition among key stakeholders and continuously improve our technical capacities.
Finally, the PCC, through its Economics Office, completed studies on six sectors: sugar, corn, cargo services, retail petroleum, pharmaceuticals, and agro-chemicals. A better understanding of these essential markets enables us to be more equipped to enforce competition laws and craft pro-competitive policy suggestions that address the Filipinos’ most urgent needs.
In sum, it is paramount for competition policy to be at the forefront as we steer our economy back to its high-growth trajectory. As we dive deep into the tasks for recovery in 2021, the PCC assures the Filipino people that it will stand vigilant against anti-competitive behavior and relentlessly advocate the use of competition lens in government.
Dr. Arsenio M. Balisacan is the chairman of the Philippine Competition Commission. 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 13, 2021 here.)