How to spot, report market 'bullies' under competition law

Patrick Quintos, ABS-CBN News

Posted at Aug 08 2017 08:19 AM

MANILA - The country's landmark anti-trust law comes into full force on Wednesday, and the Philippine Competition Commission says the public can take part in the crackdown against those engaged in unfair market practices.

Violators of the Philippine Competition Act face fines of P100 million for the first offense and P200 million for the second offense and up to 7 years in prison.

The chairman of the PCC, Arsenio Balisacan, is leading a public advocacy push for the law, which aims to empower consumers.

"The PCC (Philippine Competition Commission) is there to promote business, to ensure that there is a level playing field so that anyone can participate in the marketplace, whether they are big or they are small," he said.

"Bigness or prominence is not prohibited by the law... What is prohibited is when you have only a few, 2 or 3 dominant players in the market and they abuse that dominance by raising prices unnecessarily or preventing their potential competitors from coming into the market by buying them prematurely or killing them by lowering prices below cost," he said.

How to spot, report market 'bullies' under competition law 1
A vendor prepares garlic for sale at a public market in Manila. The price of garlic remains vulnerable to price hikes due to unpredictable supply shortages. George Calvelo, ABS-CBN News

The public can report potential violators of the law by watching out for these red flags, according to the PCC:

CARTELS, FAKE SHORTAGES

A sudden increase of a commodity can be a warning sign of a "cartel," which happens when businessmen agree to fix prices at higher levels.

Supply and demand dynamics, not colluding rivals, should determine the price of a product.

Government officials have in the past investigated alleged "cartel" pricing of rice and garlic.

Unusually high prices can also indicate that rivals have agreed among themselves to limit production to create a fake shortage.

MARKET SHARING

Two pharmaceutical companies, for example, can divide Metro Manila among themselves to establish territories instead of competing, this constitutes market-sharing.

Companies who produce the same product may also opt to divide the market by age group instead of by geography, which amounts to the same offense.

This anti-competitive business practice discourages competition by limiting consumers' choices.

How to spot, report market 'bullies' under competition law 2
Consumers flock to a public market in Quezon City. Because of the wide variety of choices and relatively cheap prices, public markets continue to be the preferred source of goods for most households in the country. Jonathan Cellona, ABS-CBN News

RIGGED BIDDING

This occurs when companies intentionally submit losing bids for a supply or construction project to allow one clear winner.

Bid-rigging enables companies to manipulate the price of the contract. The "pre-selected" bidder wins, while the "losing" bidders get their respective commissions. Sometimes, bid-riggers agree to taking turns at winning contracts. 

PREDATORY PRICING

An established phone-maker may choose to slash prices for a prolonged period to undercut a new player. This could be a sign of predatory pricing.

The established company usually restores the price of its product after it has killed off the new player. A price hike is also possible to recover losses from discounted sales.

PRICE DISCRIMINATION

A fast-food company may offer discount coupons specifically for construction workers to take advantage of demand from nearby building sites.

Such "price discrimination" will eventually undercut and force small eateries to close shop.

How to spot, report market 'bullies' under competition law 3
A vendor displays the current prices of rice in the market. Regulations limit the wide fluctuation of the price of the basic commodity, a staple in Filipinos' daily meals. Romeo Ranoco, Reuters

BLOCKING ACCESS

A popular coffee shop may hoard the cheapest available paper cups to force its smaller rivals to buy more expensive brands.

This forces the small players to sell their products at higher prices to recover costs.

EXPLOITATION

Small town pineapple farmers may be forced to sell their products at unreasonably low prices simply because there is only one buyer in the area.

Businessmen who take advantage of this situation are guilty violating the competition law.

MERGERS AND ACQUISITIONS

A big internet company sells its business to an equally large rival, pitting the merged entity to compete against a much smaller, third player.

Since competition has been significantly reduced, these companies could be engaged in anti-competitive mergers and acquisition.

Under the Philippine Competition Law, mergers and acquisitions that amount to at least P1 billion and up will be subject to a review.

How to spot, report market 'bullies' under competition law 4
An elderly displays the variety of maintenance drugs he has to take for his various illnesses. Drug prices in the Philippines are still one of the highest in Asia, despite the passage of the Cheaper Medicines Act in 2008. Jonathan Cellona, ABS-CBN News

REPORTING, FILING A CASE 

Cases against businesses engaged in unfair practices may be filed before the PCC. Commissioner Johannes Bernabe outlined 4 points:

1. Observe

Take note of the behavior of businesses suspected of engaging in unfair practices, and its effects on competition 

2. Report 

If any of the red flags are observed, the public can send tips to the commission via e-mail,queries@phcc.gov.ph, so that the PCC personnel may review it. 

3. File a verified complaint 

The public can also fast-track the process by getting a lawyer and filing a formal complaint. Make sure the complaint is written in affidavit form and is notarized.

4. Timetable 

All tips and complaints undergo 2 phases of review before the PCC decides, with the process taking as long as 2 years.