How the PCC is regulating a changing game

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By Janina C. Lim

THE COUNTRY’S historic comprehensive competition policy, which eventually led to the creation of its very first competition regulator, could be traced to a controversy involving garlic. In June 2014, the household staple became the center of an investigation after prices rose by 74% over a one-year period. The culprit: a cartel controlling 75% of the country’s garlic imports. Charges of graft and corruption were slapped on the people behind the cartel, but they were spared of charges of monopolistic behavior — no thanks to the country’s lack of a competition law at that time.

Thus when the Philippines — the last of the original five members of the Association of Southeast Asian Nations (ASEAN) to adopt such law — finally created an independent quasi-judicial body to promote and maintain market competition, the Philippine Competition Commission was seen to become a game-changer. Holding office inside the imposing DAP building along San Miguel Avenue, the watchdog stands guard over the bustling central business district of Ortigas, and by extension, the rest of the country.

But there was more to deal with. Aside from mediating between corporations, the newly formed commission, too, had to deal with the business landscape’s brave newcomers: the startups armed with game-changing ideas. Case-in-point: the controversial Grab-Uber deal.

That most start-ups thrive in the Information Technology (IT) sector and often fall below the threshold poses as a challenge for some countries, according to PCC Commissioner Stella Luz A. Quimbo.

“[T]hese firms, these start-ups, are IT firms and tend to be smaller in terms of assets and revenues which is why there’s a threshold issue,” Quimbo said during a BusinessWorld roundtable with PCC Commissioners on June 1. “Meaning to say, they tend to fall below the threshold which is why many jurisdictions have been reassessing their threshold to try to automatically capture those kinds of transactions.”

Yet officials of the PCC believe that the country’s relatively new framework suffices in fostering competitiveness across industries amid disruption. The anti-trust body claims to recognize the need to keep up with the technological trends in order to effectively analyze rapidly changing markets.

The PCC itself has adjusted its thresholds for reporting mergers and acquisition deals. Last March, it hiked the threshold for the size of person to P5 billion and the size of transaction to P2 billion amid increasing appeals from the private sector.

In fact, a bill being proposed in Senate is pushing for the thresholds to be jacked up to more than P10 billion and even demands that an industry-specific threshold be set up.

“We still feel that a lot can be done that will be able to really filter what are anti-competitive mergers and acquisitions and what are not,” PCC Chair Arsenio M. Balisacan said.

“But if you’re asking that we should increase that to say three times that, we need to have at least a basis,” the economist noted, adding that setting up a threshold for each industry will be a “messy” approach with the vast range of sectors and sub-sectors.

However, a few days after the policy was imposed, ride-hailing start-up Grab bought out Uber’s Southeast Asian operations.

With the transaction falling below the new thresholds, the local units of the multinational ride-hailing companies did not seem to see the need to inform the PCC.

“But, thankfully, our law is modern enough that it actually allows us to do a motu proprio review which is exactly what we did with the Grab-Uber transaction,” Quimbo added.

The agency’s Mergers and Acquisitions Office has flagged Grab Holdings’ and MyTaxi.PH Inc.’s purchase of Uber and Uber Systems Inc. as resulting in a “substantial lessening of competition” in the ride-hailing market, citing price increases and deterioration of services that hint of the involvement of market dominance.

When asked if the Philippine Competition Act of 2015 is sufficient in analyzing new business models that are emerging in the digital age, Quimbo replied: “Yes, in terms of tools. Actually even in terms of the legal framework of the competition act.”

For his part, PCC Commissioner Bernabe echoed the same, noting that the competition disciplines are established “to be technologically neutral.” However, he pointed out that the emergence of data-driven businesses are now being considered in gauging a transaction’s impact on a market. This, as many digital platforms today offer services in exchange of a customer’s personal information instead of monetary returns.

“Traditionally people look at goods and services as the conventional categorization of products… But now, what we’re really looking at are data, information. So that’s the new currency, that’s the new product which we will have to watch out for… to what extent can you gauge the competitive practices as they relay to data,” Mr. Bernabe said.

Asked, how the body is prepared in facing disruptive start-ups, PCC commissioner and lawyer Amabelle C. Asuncion said the current framework remains relevant on that aspect and only needs to be applied differently depending on the needs of a certain market.

“That issue has been raised by many foreign jurisdictions and the consensus is the rules that we have, that we use in analyzing competition issues remain relevant. There is still really no need for new rules. They are still useful,” Asuncion said.

Notwithstanding the relevance of the relatively new law that was languished for a quarter of a century before seeing legislation, the PCC believes it still needs to cope with the dynamism that technologies are creating in several markets.

“Our approach in the commission is to make sure we are always attuned to the times,” Balisacan said. “We have to be innovative as well and be adoptive in these situations.”