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Alleged cement cartel a test case for competition law

AS a businessman, I have always considered free competition, together with level playing field, as the foremost guiding principle in a free market like the Philippines.

I pursued the same principle during my career of more than two decades as an elected official. In fact, I sponsored and pushed for the approval of a competition legislation during the 15th Congress, when I chaired the Senate Committee on Trade and Commerce.

During the floor deliberation on Senate Bill 3098, or the Competition Act of 2011, I said free and open competition, which is the foundation of a vibrant economy, “gives the consumers the benefits of lower prices, high-quality products and services, adequate supply and a wider array of choices”.

As an entrepreneur before I entered politics, I have not changed my position, which I presented during that deliberation on the Senate floor in 2012—monopolies and cartels pose undue advantage over our micro-, small and medium enterprises, which make it easier for them to drive out the small players from the industry.

A competition law was finally signed into law in 2015, Republic Act (RA) 10667, or the Philippine Competition Act. The two-year transitory period for companies to undo their anticompetitive practices ended on August 8, so the Philippine Competition Commission (PCC), which has been receiving complaints for anticompetitive practices, can now begin imposing penalties on violators, including fines of as much as P100 million and criminal prosecution.

In a news briefing early this month, the PCC said it was conducting “full administrative investigation” on the complaint of cartel-like conduct against large cement manufacturers, which was filed last year.

A PCC official explained that full administrative investigation meant the inquiry could cover the whole industry, instead of the people or companies mentioned in the
complaint. Investigation is elevated to this stage if the commission found reasonable grounds to believe that anticompetitive acts or practices had been committed, such as in the complaint against cement companies.

Victorio Dimagiba, former undersecretary of the Department of Trade and Industry and currently president of consumer advocacy group Laban Konsyumer Inc., alleged in his complaint that the Cement Manufacturers Association of the Philippines, LaFarge Holcim Philippines Inc. and Republic Cement and Building Materials Inc. violated RA 10667 by engaging in anticompetitive agreements, including “restricting competition as to price or components thereof or other terms of trade, abusing their dominant position by engaging in conduct that substantially prevent, restrict or lessen competition, imposing barriers to entry, or committing acts that prevent competitors from growing within the market”.

Companies engaged in cartel operations may not have formal agreements among themselves to manipulate the market, so the commission’s investigators are looking at their bidding patterns, pricing and other circumstantial evidence to establish culpability.

I would add that conducting repairs on their manufacturing plants, at the same time, could also indicate price manipulation because it means cutting supplies to the market, which is a ground for raising prices.

It is important to note that manipulation of prices and supplies in the cement industry affects other sectors, such as construction, real estate and even the government’s infrastructure program.

In the property business, where I am involved, players engage in dog-eat-dog competition, which benefits homebuyers through better pricing and products.

Cement is a major cost of housing construction, so increasing prices artificially, for instance, will compel developers to pass on the added cost to homebuyers.

The same is true with contractors for other building activities, including the infrastructure projects being implemented by the government. These projects are paid by taxpayers, so the additional expenses resulting from anticompetitive practices will ultimately be borne by every Filipino taxpayer.

The investigation into the alleged cement cartel could serve as a precedent in the government’s campaign against unfair and illegal business practices. My wife, Sen. Cynthia A. Villar, said she would request the PCC to investigate the operation of a garlic cartel, which has been blamed for the skyrocketing prices of the essential kitchen commodity.

 

For comments, e-mail mbv.secretariat@gmail.com or visit www.mannyvillar.com.ph.

 

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