Early this year, the Philippine Competition Commission (PCC) Enforcement Office launched a leniency/whistleblower programme offering immunity from lawsuit and reduction of fines to cartel members who provide information that will help the PCC investigate and prosecute cartels. This forms part of the PCC’s increased efforts to crack down on anti-competitive agreements and conduct.
The Philippine Competition Act (PCA) prohibits anti-competitive agreements such as price fixing and bid rigging, and other agreements that have the objective or effect of substantially preventing, restricting or lessening competition. It also prohibits entities from abusing their dominant position by engaging in conduct that would substantially and negatively affect competition. Companies face up to Php250 million (US$4.8 million) in fines if found guilty of these acts.
Businesses were given a period of two years from the effectivity of the law to reorganize their business structure, or to renegotiate agreements, in order to comply with provisions of the PCA. Ever since the transitory period ended on 8 August 2017, the PCC has been more aggressive in its enforcement activities.
Some areas that have been the subject of PCC probes include the garlic industry, international shipping lines (specifically, the imposition of unnecessary shipping charges on shippers), and the cement industry. More recently, the PCC has expressed an intention to look into an alleged cold storage cartel in the onion industry, and to investigate whether recent power plant outages is an intentional scheme among power suppliers to raise electricity prices. It is also investigating allegations of bid rigging involving a government project awarded in 2017.
In 2018, the enforcement office opened 11 preliminary inquiries, nine of which ripened into full administrative investigations. Two of those full administrative investigations have been closed. One of the closed investigations involved the Philippine Academy of Ophthalmology (PAO) and Philippine Health Insurance Corporation (PhilHealth). The PAO’s mission guidelines require ophthalmologists to first obtain permission from the PAO, or the local ophthalmologist of an area, before they can conduct a medical mission in the area.
PhilHealth will not compensate the ophthalmologists conducting the medical mission if such permission is not obtained from the PAO or the local ophthalmologist of the area. The enforcement office raised competition concerns regarding the above-mentioned practice because by requiring visiting groups to get permission from PAO/local ophthalmologists before they can conduct a medical mission, the PAO effectively imposed a barrier to entry, limited competition, and facilitated the division of practice territory. However, despite such competition concerns the investigation was closed, as the parties were able to rectify the above-mentioned acts within the transitory period.
The other closed investigation involved the vessel fumigation business. The unnamed complainant alleged that certain inspection companies were engaging in irregular post-fumigation inspections to undermine the business reputation of the complainant, and that a major fumigation company was involved the scheme. The enforcement office did not find any evidence to support collusion among the inspectors, and noted that the major fumigation company allegedly involved in the scheme did not have sufficient market power to be considered dominant in the vessel fumigation market. The office also noted that there were many players in the vessel fumigation market, and that barriers to entry into the business were generally low. Further, customers can easily switch between fumigators without incurring any significant additional cost.
Recently, the enforcement office filed a case against a mass housing developer for imposing an exclusive internet service tie-up on its tenants, preventing them from availing of the services of other internet service providers. Aside from preventing other providers from installing fixed-line internet on units, the developer also prevented other providers from marketing to the condominium residents. It marks the first time the enforcement office filed a case for abuse of dominant position under the PCA, and it will be interesting to see how the case will turn out, as it will set the standard of how similar cases will be prosecuted in the future.
Competition law is a relatively new concept in the Philippines, hence many businesses may not even be aware that they are engaging in activities, or are parties to agreements, that may be considered anti-competitive. They may be engaged in agreements or conduct that may have been permitted before, but which must now be reevaluated in light of the PCA and the expiration of the two-year transitory period. This is why it is important for practitioners to remain abreast of developments in this emerging field, so that they can effectively guide businesses in complying with the provisions of the PCA.
As the PCC increasingly expands its capabilities in investigating and prosecuting anti-competitive agreements and conduct, businesses and competition law practitioners must keep up.
Korina Ana T Manibog is an associate with the corporate and special projects department at ACCRALAW.