The country’s competition watchdog said it remains vigilant to transactions below the significantly lower mandatory threshold merger review of P50 billion even as it focuses on its enforcement function during this period of pandemic.
Philippine Competition Commission (PCC) Chairman Arsenio Balisacan issued this warning during the PCC-Philippine Chamber of Commerce and Industry (PCCI) virtual roundtable on “Competition in the Recovering Economy”.
“We will continue to undertake careful and timely review of mergers breaching the new notification threshold of P50 billion,” said.
Under Bayanihan II, mergers and acquisition with transaction value of less than P50 billion are exempt from compulsory notification for 2 years. The law also barred PCC from conducting motu proprio review for 1 year.
Despite this prohibition, Balisacan stressed, “Even with this significantly higher threshold, PCC remains vigilant to transactions that may substantially lessen competition.”
Before the Bayanihan II was passed into law, companies engaged in M&As with transaction value of P2.5 billion and above must notify the PCC.
The high threshold for compulsory notification and review provision was inserted in the Bayanihan II law at the bicameral level without consulting PCC.
With the new threshold, this means more companies are now exempt from PCC’s review. But, this is also an opportunity for PCC to significantly heighten its efforts to open more cartel and abuse of dominance investigations in priority sectors.
Since the passage of the Bayanihan II, PCC has redirected its efforts on the enforcement aspect, which is more on the investigation of cartels, bid rigging and other anti-competition practices.
“Hard core restrictions like price-fixing and bid-rigging, and abuses of dominance will be actively prosecuted and duly penalized,” said Balisacan.
PCC also continues to advocate the use of the competition lens in the crafting of government interventions, by actively pushing its inputs whenever the Executive and Congress request an analysis of the competitive effects of government policies.
For example, he said, the Commission expressed its support for the economic stimulus programs to keep the economy afloat amid global uncertainty. In various position papers, PCC recommended that subsidies be more equitable to and inclusive of micro, small and medium (MSMEs) and that access to subsidies be transparent and non-discriminatory.
In addition, Balisacan has called on the government’s policymakers to pass pro-competitive laws.
“The economy stands to gain if our policymakers would now pass pro-competitive laws and regulations to shake up stagnant and long-protected industries such as telecommunications. With foot traffic falling significantly in the traditional brick-and-mortar stores these days, many MSMEs are finding it necessary to move their businesses into the digital sphere. Thus, competition-enhancing reforms in the telco sector have now become even more critical and urgent,” he said.
Moreover, he stressed that adhering to competition principles remains beneficial during the pandemic, and becomes even more so during the recovery period, as entire country work together to build a more resilient and inclusive economy.
He recalled that in the years that the government delayed putting in place a comprehensive competition law, the Philippine economy has missed many opportunities to increase its productivity, strengthen its attractiveness as an investment destination, and achieve rapid growth and inclusive socio-economic development.
Hence, he said, reforms have been undeniably crucial for us to rebuild a more resilient economy as we wade into the ‘New Normal’.
While the domestic economy is on its way to recovery, it is also essential to recognize several risks to the competition landscape that the pandemic has created.
By doing so, he said, “We can avoid worsening the prospects for the already challenging state of competition in the country.”
He noted that the Philippines fares relatively poorly in cross-country comparisons of domestic market restrictions and market concentration. “Evidence shows that high market restrictions and high market concentration stifle prospects for sustained and inclusive growth,” he pointed out.
Relative to other countries in East Asia and the Pacific region, the Philippines harbors a higher proportion of monopolies, duopolies, and oligopolies in the manufacturing sector.
“We find that we have much to do to reverse state-enabled restrictions stifling market competition and the realization of the country’s economic potential when we examine the World Bank’s Product Market Regulation indicators. Relative to other Asian economies, Philippine markets exhibit higher restrictions on competition, and restrictive state measures significantly contribute to this outcome,” he stressed.
In the next year, he said the domestic economy will surely still see the global economy affected by drastic changes that COVID-19 has introduced via supply and demand shocks.
“Given these extreme circumstances, our sound macroeconomic fundamentals and the lessons gained from past crises are not enough to get us out of the slump. To achieve an inclusive post-pandemic development, the recovery program must be based firmly on compassion for the poor and highly vulnerable groups and a level playing field for businesses,” he concluded.