Philippines: Department of Justice

The development of competition law in the Philippines dates back to as early as 1925, making it the first country in Asia to have a competition law. However, a unique attribute of the Philippine competition policy regime is its adoption of a sectoral approach to competition policy and law (CPL). As such, the Philippines has more than 30 industry-specific and consumer-related competition laws, including provisions in its criminal, civil and corporation codes. The other competition-specific laws are enforced by more than 60 sector regulators.

In 2011, Philippine president Benigno S Aquino III designated the Department of Justice (DoJ) as the country’s competition authority (via Executive Order No. 45, series of 2011) and established the Office for Competition (OFC) to carry out the DoJ’s mandate as such. Specifically, the OFC is tasked with enforcing competition policies and laws from deceitful business practices, investigating cases involving competition law violations, and prosecuting violators in order to prevent, restrain and punish monopolisation, cartels and combinations in restraint of trade. It supervises market competition as well by ensuring that prohibitions and requirements of competition laws are adhered to.

The OFC also publishes and disseminates studies and reports on competition to inform and guide the industry and consumers. It monitors and implements measures to promote transparency and accountability in markets as well. Another important part of its mandate is to prepare and promote international cooperation, and strengthen Philippine trade relations with other states, economies and institutions in trade agreements.

Gaining traction via strategic initiatives

Since its creation, the OFC has focused strategic actions on enforcement and advocacy. This twofold mission is geared towards promoting a healthy culture of competition in the country. Primary initiatives included the development of various enforcement issuances in an attempt to clear up prevailing competition provisions and the processes involved in competition laws.

To date, the OFC has docketed 32 complaints involving bid-­rigging, mergers and acquisitions, vertical and horizontal agreements, and other restrictive trade practices. Of these cases, 12 have been closed and the rest are pending resolution.

The OFC continues its fact-finding investigation on the alleged collusion among power firms which triggered power rate increases in 2013. At the same time, multi-stakeholder consultations are being held to ensure that the whole gamut of competition issues in the energy sector is addressed in a holistic manner. The OFC also continues its investigations on cartel operations in the commodities sector.

To effectively set up a merger control regime based on existing provisions of law, the OFC and the Philippine corporate regulator, the Securities and Exchange Commission (SEC), signed an agreement which sought to define the roles of both parties whenever applications for merger or consolidation are submitted to the SEC. Broadly, the agreement provides for the notification of merger or consolidation applications, the timeline and procedure to assess such applications, and preparation of report.

The OFC, in partnership with the Australian Competition and Consumer Commission (ACCC), is currently drafting a manual for case investigation that will cater to specific Philippine legal and regulatory settings in CPL enforcement. A comprehensive training was previously conducted to equip the OFC and sector regulators with basic and advanced skills and techniques in investigation. The proposed manual will include the process flow for complaints intake and case handling.

Mapping areas of advocacies

In the area of advocacy, the OFC has been regularly releasing policy papers. The first policy paper,  ‘Cooperation for Competition: The Role and Functions of a Competition Authority and Sector Regulatory Agencies’, provides a framework for the interface between the OFC and sector regulators. It describes the current state of competition legislation in the country, presents the economic arguments for governments to regulate industries, and proposes an operational framework between competition and regulatory agencies. The second paper, ‘Governance in the Effective Enforcement of Competition Policy and Law’, outlines the requisites of sound policy and decision-making in government, specifically that of a competition agency. It discusses ‘regulatory capture’ and its effect on governance, and highlights the core values of independence, transparency and accountability.

In solidarity with the global family implementing CPL, the OFC joins its colleagues in the global competition network in the observance of World Competition Day on 5 December every year. The celebration has been institutionalised through Proclamation No. 384, series of 2012, which declares every 5 December as National Competition Day.

Since 2012, the OFC has commemorated the event through various activities. Now in its third year, the OFC successfully conducted the first National Competition Conference (NCC) held on 9 December 2014. The NCC, which is envisioned to be an annual event organised by the OFC, serves as a platform for discussion of the most pertinent competition issues facing the region and the world. This year’s theme, ‘Advancing Economic Justice through Competition Policy’, sets the tone upon which all succeeding conferences will be anchored on. In the final analysis, advancing economic justice through an inclusive and participatory economy that promotes and protects consumer welfare is the bedrock of any issue pertinent to competition policy and law.

In line with the OFC’s initiative to monitor the country’s performance in terms of ranking in major indices, the OFC contributed to the ‘Doing Business 2015’ report of the World Bank, specifically in the component on enforcing contracts. The OFC likewise monitors the country’s rankings in the Global Competitiveness Index and the Corruptions Perception Index, where significant improvements have been noted in 2013.

It has always been the OFC’s position that there is no one-size-fits-all approach when it comes to the institutional design, degree of independence and composition of the competition authority. Based on international best practices, a country’s enforcement regime should be anchored on its unique history and culture that brought about its legal and political system, market structure and business culture, among others.

Scaling up consumer protection

Competition policy contributes to economic growth to the ultimate benefit of consumers in terms of products with better quality and at lower prices. To this end, the OFC has endeavoured to institutionalise simple but effective measures, including the issuance of a series of advisory opinions on emerging consumer protection issues in its three priority sectors: energy, transport and telecommunications.

Supervising competition and promoting transparency in markets

The OFC recognises the pivotal role of competition policy in regulatory reform. Thus, a number of consultations with regulatory agencies were initiated by the OFC to address nagging competition issues in the aforestated priority sectors. Although much remains to be done, the action steps undertaken so far have raised consciousness on the importance of competition in spurring economic growth.

For example, the OFC and the Philippine Ports Authority (PPA) have agreed to conduct transport sector studies aimed at simplifying business operations in ports, encourage competition, and improve the competitiveness of the country’s trade and industries that depend on seaborne export and import. The adoption of executive orders as recommended policy actions is underscored in each study.

Studies were also undertaken to liberalise and assess competition issues in the tug assistance industry as a result of the alleged conflict of interest in providing tug assistance services by harbour pilots and restrictive private standards resulting in a monopoly.

With respect to the air transport industry, the OFC has taken initial steps to analyse key areas that might affect the level of competition among air carriers operating in the Philippines.

In the telecommunications sector, the OFC has prepared an assessment of issues and challenges in the provision of telephony services to complement an earlier study on internet service. The study on telephony services outlines the anti-competitive and other abusive business practices of telecommunication companies in their provision of call and SMS services. A significant outcome of the study is the mapping of ownership in terms of spectrum control and equity interest of the various telecommunication companies by which market concentration and vertical integration in the industry will be determined.

Strengthening trade relations, promoting international cooperation

In support of the ASEAN goal of economic integration in 2015, the Philippines through the OFC, during its stint as chair of the ASEAN Experts Group on Competition, introduced projects to accelerate the pre-integration process, such as the development of a regional cooperation framework among ASEAN competition agencies.

The Philippine government continues its joint undertaking with the European Union through the Trade-Related Technical Assistance project, which aims to support the country’s integration into the international and regional trading and investment system through an approach that encompasses policy and legislative reforms, procedural and technical improvements, as well as capacity development.

In partnership with the Japan International Cooperation Agency (JICA), the Japan Fair Trade Commission (JFTC) and the Asian Development Bank Institute (ADBI), the OFC organised the East Asia Conference on Competition Law and Policy and East Asia Top Level Officials in 2013. President Aquino delivered the keynote address with the theme ‘The Impact of Competition Policy and Law to the Market Economy’. The conference gathered competition experts, academicians and business representatives from the East Asia region to advocate the importance of competition policy.

A memorandum of understanding that commenced in January 2013 ends on December 2016 between the OFC and the International Finance Corporation, a member of The World Bank Group, is being carried out to develop a four-year project that supports an improved business environment through more transparent and competitive regulations in the trade and logistics sector. This joint undertaking aims to identify and address competition barriers in the domestic trade and transportation with the assistance of key sector regulators.

In line with this cooperation, the OFC and IFC is in the process of finalising a study on product market regulation (PMR) to assess the economy-wide and industry-specific regulatory structures and policies that restrict competition in upstream markets such as electricity, energy, telecommunications and transport using the PMR indicators methodology.

The Philippines is the second country in the ASEAN and the third in Asia to undergo the UNCTAD Voluntary Peer Review, which took place during the 14th Session of the Intergovernmental Group of Experts (IGE) on Competition Law and Policy in Geneva, Switzerland in July 2014. Based on the outcome of the peer review, UNCTAD developed a three-year technical assistance programme for the Philippines to be implemented by the OFC. Said programme includes specific capacity building interventions that are anchored mainly on the recommendations identified in the Peer Review Report, along with legislation, enforcement, advocacy and partnerships and cooperation.

In addition to ongoing cooperation with international bodies, the OFC has actively participated in interagency meetings on various projects supported by donor organisations such as the Increasing Competitiveness for Inclusive Growth (ICIG). The ICIG is a project supported by the ADBI and the JICA. It is focused on key reform priorities aimed at employment generation. Essentially, the structural reform priorities include efforts to enhance the business climate by promoting competition policy, regulatory efficiency, competitive logistics and private sector participation in infra­structure through public-private partnership projects.

The OFC also successfully hosted the 4th ASEAN Competition Conference in Manila in July 2014 with the theme ‘Building Blocks for Effective Enforcement of Competition Policy and Law’ which aimed at promoting competition policy for regional development and shaping the direction of competition policy and law implementation within the ASEAN.

The OFC has been designated as the APEC-Competition Policy and Law Group Convenor for 2015, a timely development in view of the Philippine hosting of APEC next year. The CPLG convenorship is an opportunity for the OFC to advance economic justice throughout the Asia-Pacific region and serves as testament to the Philippines’ emerging competition regime.

Going forward

The OFC continues to make inroads in bringing the issue of competition policy and law to the forefront. Nonetheless, it will bolster support for legislative efforts to pass a unified competition law by lending expertise or acquiring technical assistance from other partners.

In the next two years, the OFC shall continue to focus on priority areas as well as identify new deliverables. Pursuing its mandate, it intends to formulate a comprehensive national competition policy, host a regional workshop on enforcement strategies in competition policy and law, conduct study visits and internship exchanges, as well as strengthen capacity in merger assessment.

The OFC also plans to prepare enforcement guidelines, conduct competition assessment and regulatory impact assessment, and regularly release policy papers on emerging enforcement issues. The development of sector studies for energy, transport and telecommunications will be sustained in the coming years.

Meanwhile, the OFC will carry on its task of preparing advisory opinions on consumer protection concerns and improve practical and operational capacity by hiring additional permanent staff, setting procedures and upgrading equipment.