If all the Senate did in its recently concluded session was to pass the anti-cartel bill, all the consumers in our blighted archipelago should truly be grateful.
The Competition Act of 2009, Bill No. 3197, was authored by Senators Enrile, Trillanes IV, Roxas, and Angara. The title is a dire warning to the cartels that have scourged us: “An Act penalizing unfair trade and anti-competitive practices in restraint of trade, unfair competition, abuse of dominant power, strengthening the powers of regulatory authorities and appropriating funds therefore, and for other purposes.”
The Constitution allows monopolies, but they are regulated. Meralco is the sole and monopolistic distributor of electricity in Metro Manila, but the Energy Regulatory Board keeps Meralco on a short leash.
Cartels, or combinations in restraint of trade, are not allowed by the Constitution. But there are no rules. The provisions in the Penal Code are toothless because it is not backed up by a regulatory framework.
What is a cartel? Two or more suppliers or manufacturers colluding to avoid competition and keep their prices high are a cartel.
The most glaring cartel is the cement industry. When I built my house in 1960, there was more than one cement factory around. The cheapest cement cost P1.90 per 50-kilo bag, delivered at site. Today, the cement cartel has only one price, P180 per bag in Makati. You can scour the landscape and you will find no product the price of which has soared to such heights as cement.
The banks are also a cartel. The Bankers Association prescribes the minimum lending rate by members.
Besides price fixing, there are other subtle ways for cartels to ply their evil trade. For example, cartel members agree to sell their wares only in their respective areas of operation. Also, a cartel of electric motor manufacturers can agree to assign to each member a certain horsepower rating.
The Enrile bill, for the first time, grants the Department of Justice vast powers to investigate and prosecute on its own.
The penalties are severe. A natural person who violates the law can be fined at least P1,000,000 or at most P10,000,000, and a prison term not exceeding ten years. A firm can be fined at least P10,000,000 or at most P100,000,000.
In the U.S., the anti-cartel law is enforced by the dreaded Anti-Trust Division of the Justice Department. Not even Microsoft would dare cross swords with the Anti-Trust Division.
About 20 years ago, an international conference was held in Glasgow. The conference was to hammer out rules on insurance on nuclear plants, a new line of insurance. When the agenda reached the item on pricing, the American delegation stood up and begged to be excused. Had the delegation taken part in price fixing, the Anti-Trust Division would have hauled them off to the nearest jail as soon as the delegation landed back in New York.
About five years ago, the Philippine telecom industry had a conference in Honolulu. When they agreed to fix prices, the conferees realized what they had done. They all scooted to the airport before the Anti-Trust Division could grab them.
The Enrile bill now goes to the House. Let us hope that our wise representatives, instead of pushing for such silly matters as Con-Ass, will quickly approve the bill.
In next year’s elections, all consumers should remember the authors and those who voted for the Enrile bill.
The Enrile bill is long overdue. But better late than never.
(Next: The Longest Running Cartel)