Cartels beware: PCC implements Leniency Program

By Bernie Cahiles-Magkilat

The Leniency Program, which is similar to the whistle-blower program of the government, takes effect today, sending a strong signal to cartels and unscrupulous firms that they are held accountable for their anti-competitive agreements, practices and conduct.

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Atty. Orlando P. Polinar, director of the Philippine Competition Commission (PCC) Enforcement Office, said the Leniency Program Guidelines take effect yesterday, January 19, 2019, following their publication last December 29, 2018.

The Leniency Program allows any entity that participates in a cartel to avail of leniency in the form of either immunity from suit or reduction of fines in exchange for the voluntary disclosure of information regarding the cartel it is involved in.

Polinar explained that it is similar to a whistle-blower program except that under the Leniency Program, the applicants are not just ordinary informants, but are themselves participants or members of the cartel being reported.

“We want to spread the word that there is now a program for past and current cartel participants to break ranks and get immunity or reduction of fines in exchange for their cooperation with the PCC, particularly in providing evidence and information,” he added.

In essence, Polinar said, the Leniency Program is meant to undercut cartel-like behavior such as price-fixing, bid-rigging, output restriction, and market allocation that hurt consumers and sabotage the economy’s gains.

“These violations are widely considered to be the most harmful form of anticompetitive behavior,” said Polinar.

The PCC Leniency Program is designed to deter the creation of such cartels, and to aid in the detection and prosecution of existing ones by incentivizing cooperation from current and former cartel participants who possess information and evidence necessary for a successful investigation and prosecution of said offenses.

The PCC will only allow a maximum of one beneficiary of immunity from suit and one beneficiary of reduction of fines. This policy is meant to ensure that members of a cartel will race to the PCC and disclose the existence of the anticompetitive agreement to obtain the benefits of the Leniency Program.

Any current or former participant of a cartel may apply for leniency, Polinar said.

Also, any current or former director, officer or employee of a juridical entity that participates or participated in a cartel may apply for leniency independent of their employer or of the corporation they are associated with.

The Leniency Program is a unique tool used by competition agencies around the world to boost the detection and prosecution of cartels. In other countries, Leniency Programs are reported to have reduced cartel formation by 59 percent and have increased cartel detection by 62 percent.

“The PCC is bent on cracking down cartels. To emphasize, cartel refers to groups of competitors who agree to fix prices instead of competing independently, rig bids or take turns in winning projects, divide markets among themselves, or restrict output,” he added.

Under the Philippine Competition Act, cartels can be administratively fined of up to P250 million. Cartel members may also be imprisoned for a maximum of 7 years. When the entities involved are corporations, the penalty of imprisonment shall be imposed on the officers, directors or employees holding managerial positions who are knowingly and willfully responsible for the violation.

As the country’s antitrust authority, the PCC is mandated to enforce prohibitions against anti-competitive agreements, abuses of dominance, and anti-competitive mergers and acquisitions.
The Leniency Program is one of the pillars of PCC’s investigative framework, along with Inspection Orders.

Inspection Orders, will allow the PCC, upon order of the court, to carry out dawn raids or inspections of business properties for investigations.